German business confidence drops for 6th straight month

February 22, 2019 - 5:07 am

BERLIN (AP) — Business confidence in Germany has fallen for the sixth consecutive month and hit a four-year low as worries persist about the outlook for Europe's biggest economy at a time of global trade tensions, a closely watched survey showed Friday.

The Ifo institute said its monthly index declined to 98.5 points from 99.3 in January, sinking to its lowest level since December 2014. That was a slightly worse showing than the 98.9 points economists had forecast.

Managers' assessment of both their current situation and their outlook for the next six months darkened.

Germany's economy shrank in the third quarter and stalled in the fourth, dragged down largely by one-time factors related to new car emissions standards. The Ifo said that its survey and other indicators at least point to a return to quarterly growth of 0.2 percent in the current quarter.

However, trade tensions between the United States, the European Union and other partners, as well as uncertainty over Britain's impending departure from the European Union, also are worrying businesses.

The domestic economy is "strong and solid," with investments supporting growth, while the export-oriented economy is exposed to an array of conflicts and problems elsewhere, ING economist Carsten Brzeski said. "The biggest risk is that the external risks, which up until now have hardly materialized, could become self-fulfilling prophecies, pushing the entire economy into a negative sentiment loop," he added.

Ifo's survey is based on responses from some 9,000 German companies.

Official data released earlier Friday illustrated the comfortable financial position that years of growth have put Germany in. The country last year recorded its biggest public financial surplus since reunification in 1990.

The Federal Statistical Office said the federal, state and municipal governments and the social security system took in 58 billion euros ($65.8 billion) more than they spent in 2018, the biggest figure since reunification — a surplus that amounts to 1.7 percent of gross domestic product. It was the fifth annual surplus in a row.

Germany long enjoyed better-than-expected tax revenue as the economy motored along but is grappling with the prospect of tighter public finances as growth slows. Finance Minister Olaf Scholz warned last month that "the fat years are over."

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