German business confidence falls further in April: study

Source: Xinhua    2018-04-25 02:30:28

BERLIN, April 24 (Xinhua) -- A downward trend in German business confidence continued in April, a study by the Ifo Institute for Economic Research showed on Tuesday.

The regular and closely-watched Business Climate Index compiled by Ifo fell by 1.2 points to 102.1 points for the current month. The findings were based on a survey of 9,000 company executives. Most economists had predicted a smaller decline to 102.7 in April.

"The high spirits among German executives are fading," a statement by Ifo president Clemens Fuest read. The index showed that managers were less upbeat about their contemporary situation as well as the prospects for the coming six months.

Nevertheless, the Munich-based institute did not believe that the findings would herald a reversal of growth in Germany. "We are still far away from a recession," Ifo expert Klaus Wohlrabe told the press. Wohlrabe argued that the renewed decline in the index was more reflective of a "normalization of the German economy."

The Ifo expert noted that Germany recorded unusually high quarterly growth rates for gross domestic product (GDP) of up to 0.9 in 2017. By contrast, growth in the first quarter (Q1) of 2018 was likely to be in the area of 0.4 percent, not least due to widespread industrial action, a severe flu season and a large number of public holidays.

"Businesses are reaching the limits of their capacity," Wohlrabe said. He explained that a lack of personnel meant that many companies could not accept new orders, creating a "barrier" to further growth.

The domestic effects of a tight labor market were also being reinforced by a perceived cooling of global economic momentum. The possibility of a trade war provoked by the protectionist policies of U.S. President Donald Trump in particular was a source of concern for German managers in this context.

Ifo highlighted that the assessment of commercial prospects for the next six months in export-dependent industries was most negative since August 2016. However, a majority if firms polled were still confident that they could increase exports again from the current level.

Commenting on the study, experts emphasized that a decline in German growth should not necessarily be seen as a sign of an inevitable end to the current economic boom.

"Although every recession was preceded by a downward trend in the Ifo Business Climate Index, not every downwards trend ended in a recession," DekaBank economist Andreas Scheuerle told the press. According to Scheuerle, the "correction" in business confidence measured in April merely amounted to a "renaissance of realism" following exaggerated expectations.

Similarly, Thomas Altmann of the wealth management firm QC Partners said that there was no reason for panic over a return to less exceptional growth rates. "The current boom has definitely reached its late phase", Altmann argued. He added that the "high point of growth" in Germany had most likely already been reached or passed.

Ifo has recently revised the methodology of the Business Climate Index to include service sector companies alongside representatives from the manufacturing, trade and construction industries. The new baseline year for comparison is 2015 instead of 2005, resulting in a numerically lower levels of business confidence than measured previously.

Editor: yan
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German business confidence falls further in April: study

Source: Xinhua 2018-04-25 02:30:28

BERLIN, April 24 (Xinhua) -- A downward trend in German business confidence continued in April, a study by the Ifo Institute for Economic Research showed on Tuesday.

The regular and closely-watched Business Climate Index compiled by Ifo fell by 1.2 points to 102.1 points for the current month. The findings were based on a survey of 9,000 company executives. Most economists had predicted a smaller decline to 102.7 in April.

"The high spirits among German executives are fading," a statement by Ifo president Clemens Fuest read. The index showed that managers were less upbeat about their contemporary situation as well as the prospects for the coming six months.

Nevertheless, the Munich-based institute did not believe that the findings would herald a reversal of growth in Germany. "We are still far away from a recession," Ifo expert Klaus Wohlrabe told the press. Wohlrabe argued that the renewed decline in the index was more reflective of a "normalization of the German economy."

The Ifo expert noted that Germany recorded unusually high quarterly growth rates for gross domestic product (GDP) of up to 0.9 in 2017. By contrast, growth in the first quarter (Q1) of 2018 was likely to be in the area of 0.4 percent, not least due to widespread industrial action, a severe flu season and a large number of public holidays.

"Businesses are reaching the limits of their capacity," Wohlrabe said. He explained that a lack of personnel meant that many companies could not accept new orders, creating a "barrier" to further growth.

The domestic effects of a tight labor market were also being reinforced by a perceived cooling of global economic momentum. The possibility of a trade war provoked by the protectionist policies of U.S. President Donald Trump in particular was a source of concern for German managers in this context.

Ifo highlighted that the assessment of commercial prospects for the next six months in export-dependent industries was most negative since August 2016. However, a majority if firms polled were still confident that they could increase exports again from the current level.

Commenting on the study, experts emphasized that a decline in German growth should not necessarily be seen as a sign of an inevitable end to the current economic boom.

"Although every recession was preceded by a downward trend in the Ifo Business Climate Index, not every downwards trend ended in a recession," DekaBank economist Andreas Scheuerle told the press. According to Scheuerle, the "correction" in business confidence measured in April merely amounted to a "renaissance of realism" following exaggerated expectations.

Similarly, Thomas Altmann of the wealth management firm QC Partners said that there was no reason for panic over a return to less exceptional growth rates. "The current boom has definitely reached its late phase", Altmann argued. He added that the "high point of growth" in Germany had most likely already been reached or passed.

Ifo has recently revised the methodology of the Business Climate Index to include service sector companies alongside representatives from the manufacturing, trade and construction industries. The new baseline year for comparison is 2015 instead of 2005, resulting in a numerically lower levels of business confidence than measured previously.

[Editor: huaxia]
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