German Ifo Business Confidence Deteriorates In July

(RTTNews) - German economic sentiment declined sharply in July as signs of economic recovery faded, survey data from the ifo Institute showed on Thursday.

The ifo Business Climate Index fell unexpectedly to a five-month low of 87.0 in July from 88.6 in June. The reading was seen at 88.9.

The survey showed that companies were less satisfied with the current business situation and their skepticism regarding the coming months increased considerably. "The German economy is stuck in crisis," ifo Institute President Clemens Fuest said. The current situation index posted 87.1 in July, down from 88.3 in June. The reading was expected to rise to 88.5.

Likewise, the expectations index eased to 86.9 from 88.8 a month ago. The expected score was 89.0.

The survey showed that business confidence in manufacturing declined significantly in July. Assessment of current situation weakened notably. Expectations as well as order backlogs declined from last month.

Sentiment among service providers dropped in July after rising in recent months due to more pessimism regarding outlook. They were also a little less positive in terms of the current situation.

The business climate in trade also declined. Companies were less satisfied with current business and doubts regarding the coming months also increased.

Business confidence in construction deteriorated further. Assessment of current situation weakened slightly in July, while expectations continued to be affected by significant level of pessimism, the survey showed.

"The German economy is back as the eurozone's growth problem child," said ING economist Carsten Brzeski.

The economist said the recent data suggests that the combination of cyclical and structural headwinds cannot easily be overcome. However, a rebound in the second half of the year is still possible, even though it is highly unlikely that it will be a strong one, Brzeski noted.