German business mood worsens for fifth straight month

Mon Sep 24, 2012 12:11pm EDT
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By Alexandra Hudson and Eva Kuehnen

BERLIN (Reuters) - German business sentiment dropped for a fifth straight month in September, raising fears of recession, as companies struggled with a bleaker economic outlook and the European Central Bank's bond buying plan failed to create much boardroom cheer.

Germany's relative resilience to the euro zone debt crisis has been steadily fraying as its firms see falling demand for their products from European partners and signs of a slowdown in other markets.

The European Central Bank's plan for potentially unlimited government bond-buying has raised hopes on financial markets of an end to the most acute phase of the crisis, but that optimism has not spread to the real economy.

The Munich-based Ifo institute's monthly sentiment index reached its lowest since early 2010 and the outlook component hit its worst level since May 2009.

"Today's Ifo index shows that German companies remain skeptical about the economic impact of (ECB president) Mario Draghi's magic," ING Bank economist Carsten Brzeski said.

"Despite fears of a looming Eurozone break-up clearly fading away, German businesses are downscaling their expectations. The German economy could see a contraction in the third quarter."

Ifo said its business climate index, based on a monthly survey of some 7,000 firms, fell to 101.4 in September from 102.3 in August, defying expectations for a slight rise to 102.5 in a Reuters poll of 45 economists..

The expectations index dipped to 93.2 from a previous 94.2, and fell well short of a forecast 95.0.   Continued...

A container ship is loaded at a terminal in the harbour of Hamburg, late September 23, 2012. REUTERS/Fabian Bimmer