German economy loses steam
Most analysts said the Eurozone's biggest economy Germany had clearly hit the brakes, according to a survey.
By Agencies |
FRANKFURT: German business sentiment fell in September for the fifth month in a row, a survey showed Tuesday, and most analysts said the Eurozone’s biggest economy had clearly hit the brakes. The trend was mirrored in Eurozone neighbours Belgium, Italy and the Netherlands, several also noted.
The widely watched German business climate index, calculated each month by the Munich-based economic research institute Ifo, fell to 104.2 points from 105.8 points in August, Ifo said. The continued trend lower suggested “a permanent change of course” for the German economy, Commerzbank analyst Ralph Solveen said.
“We expect the German economy to lose further steam in the coming quarters,” he added. The index has fallen steadily since April, and now stands at “its lowest level in one and a half years,” noted Martin Lueck at UBS.
For Bank of America economist Holger Schmieding: “The German economy is heading for a significant slowdown this autumn and winter.” In Germany’s key manufacturing sector, expectations now “reflect only moderate optimism.”
Exporting businesses did not fear strong effects from the euro’s rise in value, however, and “hiring will continue, although it is expected to slow according to the survey participants,” he added.
At IXIS-CIB, Sylvain Broyer said that “many factors weigh on the sentiment of German business leaders: higher payrolls, the rise in commodities’ prices, the appreciation of the euro, fears over the US economy ... and of course the current (financial) market crisis.”
Germany was not alone however, Broyer pointed out. “A similar deterioration can be observed in Belgium and in Italy,” he said.
Dutch industrial sentiment also slipped in September, Lehman Brothers analyst Sandra Petcov added. A breakdown of the German data showed that the current sentiment sub-index dipped to 109.9 points in September from 111.4 points in August. The expectations sub-index also decreased, falling to 98.7 points from 100.4 points, Ifo said. The business climate in retailing had “markedly worsened,” it added.
Global Insight economist Timo Klein was among those who underscored the “rather disappointing sharp drop in retailer sentiment.”
“This is not so much related to financial market turmoil, however, instead being caused by the recent spike of food and oil prices that have unsettled consumers about their purchasing power,” Klein said.
He said that “could delay any major recovery from the post-VAT slump in retail sales until next year,” but stressed that “prospects for a rebound in growth from next spring onwards remain bright.”
Schmieding said ECB would probably start to “tone down” suggestions that rates might rise, while Solveen at Commerzbank forecast that lending rates would remain stable this year. “At the end of 2008, the ECB will probably cut interest rates for the first time,” he said.
The widely watched German business climate index, calculated each month by the Munich-based economic research institute Ifo, fell to 104.2 points from 105.8 points in August, Ifo said. The continued trend lower suggested “a permanent change of course” for the German economy, Commerzbank analyst Ralph Solveen said.
“We expect the German economy to lose further steam in the coming quarters,” he added. The index has fallen steadily since April, and now stands at “its lowest level in one and a half years,” noted Martin Lueck at UBS.
For Bank of America economist Holger Schmieding: “The German economy is heading for a significant slowdown this autumn and winter.” In Germany’s key manufacturing sector, expectations now “reflect only moderate optimism.”
Exporting businesses did not fear strong effects from the euro’s rise in value, however, and “hiring will continue, although it is expected to slow according to the survey participants,” he added.
At IXIS-CIB, Sylvain Broyer said that “many factors weigh on the sentiment of German business leaders: higher payrolls, the rise in commodities’ prices, the appreciation of the euro, fears over the US economy ... and of course the current (financial) market crisis.”
ADVERTISEMENT
Germany was not alone however, Broyer pointed out. “A similar deterioration can be observed in Belgium and in Italy,” he said.
Dutch industrial sentiment also slipped in September, Lehman Brothers analyst Sandra Petcov added. A breakdown of the German data showed that the current sentiment sub-index dipped to 109.9 points in September from 111.4 points in August. The expectations sub-index also decreased, falling to 98.7 points from 100.4 points, Ifo said. The business climate in retailing had “markedly worsened,” it added.
Global Insight economist Timo Klein was among those who underscored the “rather disappointing sharp drop in retailer sentiment.”
“This is not so much related to financial market turmoil, however, instead being caused by the recent spike of food and oil prices that have unsettled consumers about their purchasing power,” Klein said.
ADVERTISEMENT
Schmieding agreed that those factors, along with market uncertainty, “seems to be retarding the long-awaited revival in private consumption.” He said that “could delay any major recovery from the post-VAT slump in retail sales until next year,” but stressed that “prospects for a rebound in growth from next spring onwards remain bright.”
ADVERTISEMENT
Lueck said UBS still expected the German economy to expand by 2.6% this year and 2.2% in 2008. Essentially all analysts said the clear slump in Eurozone growth prospects would make a case for the European Central Bank to keep its main interest rate unchanged, despite signs that inflation could rise towards the end of the year. Schmieding said ECB would probably start to “tone down” suggestions that rates might rise, while Solveen at Commerzbank forecast that lending rates would remain stable this year. “At the end of 2008, the ECB will probably cut interest rates for the first time,” he said.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
