German firms see Brexit clouds approaching
GERMANY is waking up to the threat of Brexit and could see weaker growth in 2017, analysts said after a key business confidence survey showed a sharp decline.
The Ifo economic institute’s closely watched index fell to 106.2 in August from its July level of 108.3, reaching its lowest point since December 2014.
Analysts surveyed by Factset had been expecting a slight rise to 108.5.
“The German economy has fallen into a summer slump,” Ifo president Clemens Fuest said in a statement, noting that all sectors surveyed except construction had reported a drop in the index, with a smaller decline in July, when German business surprised forecasters by appearing to shrug off anxiety over Britain’s late-June vote to quit the EU.
The latest correction was all the more unexpected after an investor survey by the ZEW institute in midAugust showed a recovery from the Brexit slump in confidence in July.
Ifo’s headline figure is produced from two figures representing companies’ feelings on the current business environment and the outlook for the next six months.
The sub-index measuring current business fell to 112.8, two points below its July level.
Confidence in the future outlook also took a two-point blow, falling to 100.1 from 102.1 in July.
Manufacturers, retailers and wholesalers all reported falling confidence in August.
Chemical and electrical firms were among the gloomiest in industry, Ifo chief Fuest said, while food and beverage firms were the least positive among retailers.
But one bright spot was construction, where firms had a more optimistic view of the coming months even as their view of current business clouded over.
“There is a risk that the Ifo will fall further,” said Stephen Brown of Capital Economics. “While confidence is stronger than it was in February, it still points to a slowdown in German economic growth in 2017.”