German business confidence declined to its lowest level so far this year as indicators show that the world’s fourth-biggest economy is slowing down.
The German business climate index, which is compiled by Ifo institute based on feedback from 7,000 business managers, fell to 109.7 this month from May’s reading of 110.4. Economists in a Bloomberg News survey had expected the measure to fall to 110.3.
Another measure of German services and manufacturing sector released on Monday rose much slower than expected, indicating that Germany’s economy will grow much slower this year.
“Ifo report suggests that the German upswing will not accelerate further but may lose a little steam instead,” Holger Schmieding, a London-based chief economist at Berenberg Bank told Bloomberg. “Domestic fundamentals remain solid. We expect strong gains in employment, a major rise in real incomes supported by low inflation and buoyant construction to underpin economic growth of just above 2 percent for 2014 and 2015.”
Germany’s economy grew 0.8 percent in the first quarter, much faster than the 0.2 percent recorded in the euro zone. Ifo institute’s report also showed that a measure of current conditions remained firm at 114.8 this month, while a gauge of expectations fell for the second straight month, falling from 106.2 to 104.8.
Yesterday, Markit Economics revealed that German manufacturing activity surged in June while services slowed down. A composite gauge of manufacturing and services fell to 54.2 compared with May’s reading of 55.6.
The Frankfurt-based Bundesbank expects the German economy to grow by 1.9 percent this year, 2 percent next year and 1.8 percent in 2016. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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