German Business Sentiment Drops in August

German business sentiment dropped for a fourth straight month in August as concerns about the Ukraine crisis and the impact of sanctions against Russia sweep through corporate boardrooms in Europe’s largest economy.

The Munich-based Ifo think tank’s business climate index, based on a monthly survey of some 7,000 companies, fell to 106.3 from 108, undershooting the Reuters consensus forecast of 107. ECONDE

That was its lowest level since last July and marked the longest period of successive monthly declines in the index since the height of the euro zone crisis in 2012.

 
The reading raised doubts about the strength of the economy after a surprise second-quarter contraction, sending the euro to a day’s low against the dollar and pushing German Bund futures up to a day’s high.

“The crisis in Ukraine, but also the disappointing recovery in the euro zone, are weighing on confidence and thus investment,” Berenberg Bank senior economist Christian Schulz said.

“German growth could still recover quickly if the tensions in eastern Ukraine were to subside. But that remains a distant prospect, suggesting that economic weakness will persist,” he said.

German gross domestic product (GDP) shrank by 0.2 percent between April and June and the finance ministry has partly blamed this on the Ukraine crisis and sanctions against Russia. Growth in the euro zone ground to a halt in the same period.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza