Germany’s business confidence weakened notably in February as near term outlook of firms deteriorated on political uncertainty and market turmoil, survey data from the Munich-based Ifo Institute showed Thursday.
The business sentiment index fell more-than-expected to 115.4 from 117.6 in January. The score was expected to ease to 117 in February. A similar lower reading was last seen in September 2017.
Ifo President Clemens Fuest said companies were less satisfied with their current business situation, but the indicator was at its second highest level since 1991. The score signaled economic growth of 0.7 percent in the first quarter.
After the euphoria of recent months, companies’ assessments of the business outlook for the months ahead were also far less optimistic, Fuest added.
The current conditions index dropped to 126.3 in February from 127.8 a month ago. This was also below the forecast of 127.
Similarly, the expectations index came in at 105.4 compared to 108.3 seen in January and the expected reading of 107.9.
Data showed that business climate deteriorated across all sectors, namely manufacturing, wholesaling and retailing, and construction.
The Ifo index illustrates that the latest market turmoil, the political impasse in Berlin and new fears of a protectionist wave coming from the US as well as the US tax changes are leaving the first marks on business optimism, Carsten Brzeski, an ING-diba economist, said.
Nonetheless, the economist said the German economy still has some upward potential and is not on the verge of overheating.