German business morale fell for the fifth consecutive month in January, a survey showed, signalling a downturn in Europe’s largest economy where company executives have become pessimistic about future business for the first time since 2012.
The decline in morale stems from weaker demand for German goods and services in China, the eurozone and emerging markets, from transatlantic trade tensions and also growing uncertainty linked to the UK’s looming departure from the EU. “Disquiet is growing among German businesses. The German economy is experiencing a downturn,” said Ifo economic institute president Clemens Fuest. Ifo said its business climate index fell its lowest since 2016.
The German economy expanded at a slower pace last year than in 2017 and sources said the government had cut its growth forecast for this year to 1% from 1.8%.
“The increasing danger of a hard Brexit has proved to be a mood-killer,” Bankhaus Lampe economist Alexander Krueger wrote in a research note. “This is mainly a reflection of falling expectations, which is not surprising given it is also the result of global trade disputes,” he said.
Mr Krueger said the economy, which is expected to gain impetus from private consumption and increased state spending, was still a long way from experiencing a recession. However, the downturn will continue in the coming months and any improvement will largely hinge on the outcome of Brexit and the easing of trade tensions between the US and China, both key markets for German exporters.
The manufacturing sector started showing signs of weakness last year.