German business confidence at lowest ebb in two years: Survey

25 Jun 2012

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German business confidence was down to the lowest level in over two years in June, with the worsening sovereign debt crisis clouding the economic outlook.

According to the Munich-based LFO Institute, its business climate index, based on a survey of 7,000 executives, retreated for a second straight month to 105.3 from 106.9 in May, the lowest reading since March 2010.
 
According to a Bloomberg News Survey, economists projected a decline to 105.6, in a median score of 39 estimates. Italian consumer confidence was down to a record low, according to a separate report.

According to some analysts, the euro area was clearly on the downward turn, and if there was no quick political response to the crisis, the confidence shocks which were evident in Europe would worsen the situation.

Meanwhile, policy makers continue to struggle to contain a debt crisis that had forced Spain into seeking aid for its banks.
 
While exports to countries outside the euro area had helped Germany to weather the crisis, latest data showed growth was weakening as austerity measures across the region curbed demand.
 
A survey of purchasing managers published yesterday showed German manufacturing was contracting at the fastest pace in three years.

European stocks were down for a second day, with the Stoxx Europe 600 Index down 0.7 per cent at noon in Frankfurt, and the euro 0.1 per cent higher at $1.2552.

According to Carsten Brzeski, senior European economist at ING Group in Brussels, the German economy was clearly slowing down and a contraction in the second quarter looked possible.
 
Brzeski added, while Germany was on a sounder footing than its euro-area peers, even the most solid ship could capsize in a rough thunderstorm.

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