German business morale dipped slightly in December, dented by some concern over the domestic economy although export expectations remained robust. The Munich-based Ifo economic institute's business climate index, based on a monthly survey of some 7,000 firms, inched down to 108.7 from 109.0 in November.
A Reuters poll of economists had pointed to an unchanged reading of 109.0. While the assessment of the current business situation also dipped, optimism among German managers about future business remained unchanged at the highest level since May 2014. Overall, the three main index values for business climate, current situation and expectations were roughly three points above the respective levels in December 2014.
Ifo economist Klaus Wohlrabe told Reuters the US Federal Reserve's decision to raise rates on Wednesday for the first time in nearly a decade - well heralded - was a supporting factor, but not a game-changer. "The decision is providing just as little new impetus as the dollar exchange rate (is)," Wohlrabe said, adding export expectations have picked up, especially in the engineering sector, thanks to robust demand from the United States and the euro zone.
Some companies were a bit less upbeat about the domestic situation as morale deteriorated slightly in construction and more significantly in the wholesale and retail sectors. "At least for retail and wholesale trade, the unusually warm weather probably explains somewhat disappointing sales of seasonal items," Berenberg economist Holger Schmieding said. Dekabank economist Andreas Scheuerle attributed the decline in retail also to the Paris attacks and the refugee influx.
"Maybe terrorism and the refugee crisis are leaving a bigger mark on the mood than previously thought," Scheuerle said. While most analysts see positive effects such as higher domestic demand from the arrival this year of up to a million migrants, some also warn of growing uncertainties among German consumers. A study showed on Wednesday that more than half of Germans are fearful for the future, suggesting the refugee influx and the threat of militant attacks are feeding angst.
But Nordea Bank economist Holger Sandte said not too much should be read into the overall decline of Ifo's headline figure. "Growth could still have expanded in the fourth quarter," Sandte noted. The German economy grew by 0.3 percent in the third quarter after having expanded 0.4 percent in the second. Other recent data has painted a mixed picture, with morale among investors rising to its highest level in four months in December, but private sector growth slowing in the same month.
In addition, exports have fallen as an economic slowdown in China and other emerging markets puts Germany's export-orientated companies under pressure. Last week, Ifo revised down slightly its expectations for 2015 growth in Germany to 1.7 percent. But it forecast a faster pace of expansion of 1.9 percent for next year, partly helped by higher state spending on refugees.
Comments
Comments are closed.