German business sentiment down for fourth month; Merkel blames Russian sanctions

The eurozone's economy took another hit yesterday when data showed German business sentiment sagging for the fourth consecutive month, Reuters reported.

Chancellor Angela Merkel attributed some of her country's decline in the second quarter to the Russia-Ukraine crisis, which harmed trade as a tit-for-tat sanctions  regime took hold.

The Munich-based Ifo, a research firm, echoed some of those sentiments as it reported its business climate index, based on a monthly survey of some 7,000 companies, was down to a worse-than-expected 106.3 from 108, the lowest level in over a year.

The findings were in line with earlier data on the second-quarter contraction in Germany, the bloc's biggest economy. According to Klaus Wohlrabe, an Ifo economist, Germany's growth was projected to be ''close to zero'' in the third quarter by his institute.

Meanwhile, the Ifo business confidence index was down to the lowest level for over a year in August, according to data released yesterday, as Europe's biggest economy continued to lose momentum, AFP reported. Analysts, however insist, the German economy was merely facing a soft patch, rather than an outright recession.

According to Ifo president Hans-Werner Sinn companies were again less satisfied with their current business situation. Also with regard to the further course of business, they were more sceptical than in the previous month, he added. He pointed out that the German economy was continuing to lose steam.

The Ifo headline index is computed on the basis of companies' assessments of current business and the outlook for the next six months.

The sub-index measuring current business was down to 111.1 points from 112.9 last month. Also simultaneously, the outlook sub-index was down to 101.7 points, the lowest level since May 2013.

According to Natixis economist Johannes Gareis the index "is way above its long-term average. He added, though that the day's Ifo reading continued to be consistent with positive growth and, indeed, the German economy was expected to avert falling back into recession in the third quarter.

He added that it was evident that the economy was losing some momentum.

The government also remained optimistic in its outlook for Europe's biggest economy, despite a contraction in activity in the second quarter, a report in the weekly Der Spiegel said.

For the entire 2014, the German economy could even achieve faster growth than the 1.8 per cent it was currently predicting, the magazine said, quoting finance minister Wolfgang Schaeuble.