German business confidence lowest since 2014 - Ifo
German business confidence deteriorated more than expected in February, to its lowest level in four years, according to a widely-followed survey released on Friday.
The Ifo’s business climate index fell to 98.5 from a revised 99.3 in January, missing expectations for a reading of 99.0 and marking its worst level since December 2014.
Meanwhile, the current assessment index came in at 103.4 from 104.5, undershooting expectations of 103.9.
The index measuring expectations for the next six months declined to 93.8 this month from 94.3 in January. Analysts had expected the reading to be unchanged.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said this was "another horrible headline from this survey".
"These numbers are not pretty, and appear to be following the lead from the manufacturing PMI data earlier this week. This makes sense from a broad cyclical perspective, though it is slightly odd given that the IFO is supposed to have been re-weighted recently, towards a much larger share of services, which, according to the PMIs, are doing much better. In any case, to repeat. These headlines are not pretty. Across sectors, sentiment slipped further across the board, indicating that political uncertainty and external headwinds continue to depress business sentiment.
"Whatever happened in the second half of last year got worse in Q1, and is now threatening to push the German economy over the edge. By contrast, the detailed GDP data earlier this morning suggested that huge swings in net exports and inventories have been the main problems for the German economy in the past six-to-nine months amid improving growth in domestic demand. We need some hard data for Q1 to make us smarter. For now though, the IFO is still keeping eurozone economists up at night."
Andrew Kenningham, chief Europe economist at Capital Economics, said the survey confirms the picture from the manufacturing PMI published yesterday, and suggests that German industry is in quite a deep recession.
"Indeed, on past form the business expectations component is consistent with manufacturing output declining by around 4% year-on-year in Q1.
"That said, there was some more positive news from the GDP data also released today. This confirmed that the economy did not grow at all in Q4 but it also showed that domestic demand held up well: consumption rose by 0.6% (helped by a boost from public sector spending) and gross fixed capital investment rose by 0.9%; the big drag was from inventories, which was a payback for the increase the previous quarter related to the disruption in the auto sector."