German business confidence drops unexpectedly

In a report, the German research institute Ifo said its Business Climate Index fell to a seasonally adjusted 106.2 this month from a reading of 108.3 in July, missing forecasts for a rise to 108.5.

Figures published by Markit on Monday showed that Germany’s purchasing managers index slumped to a two-month low.

FRANKFURT-German business sentiment dropped unexpectedly in August, hitting its lowest level since February, as the mood deteriorated in most parts of German industry, as well as among retailers and wholesalers, the Ifo institute said Thursday.

August’s sharp drop contrasts 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 European Union.

Meanwhile, confidence in the construction sector remained at a record level as firms were more optimistic regarding the months ahead.

“Oops. It seems that German businesses always take a bit longer to digest the news but today’s Ifo suggests that German businesses have suddenly woken up to Brexit reality”.

The Ifo said that this represented a “clear worsening”, of the business climate in Germany.

Other official figures released earlier this month showed the German economy grew 0.4% in the second quarter compared with the previous three-month period.

Berlin expects domestic demand to drive overall growth of 1.7 percent this year which would be on a par with last year. They are asked to assess their current situation and their outlook for the next six months.