Business World

Wednesday 7 December 2016

Summer slump gloom hits German business

Published 26/08/2016 | 02:30

As Germany gears up for this year’s Oktoberfest in Munich, the latest economic data makes for sobering reading. Photo: AFP/Getty Images
As Germany gears up for this year’s Oktoberfest in Munich, the latest economic data makes for sobering reading. Photo: AFP/Getty Images

The German economy has fallen into a "summer slump", with business confidence in the country dropping sharply, signalling the Brexit vote could be having an impact.

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It comes just days after the so-called flash Purchasing Managers Index for the Eurozone suggested the bloc's economy may have shrugged off the effect of the poll.

The gauge from influential German think tank Ifo stated that there had been a "clear worsening" of the business climate, with its index dropping from 108.3 points in July to 106.2 points in August.

"Both the current business situation and the expectations for the next six months were assessed more poorly by the companies than in the previous month," said Clemens Fuest, Ifo Institute president. "The German economy has fallen into a summer slump."

It comes as industry figures show that retail sales in the UK were the strongest in six months in August, boosted in part by the summer.

But the Confederation of British Industry, which produced the data, said sales volumes look set to be broadly flat over the coming month.

Its retail sales volume index rose to +9, its highest since February, from -14 in July.

Anna Leach, CBI's head of economic analysis and surveys, said the summer had brought shoppers out on to the high street, but cautioned that firms do expect sales growth to ease next month.

"While the fall in sterling has boosted visitor numbers to the UK, it is likely to push up the price of imported goods over time which will mean households will be more likely to rein back spending on non-essentials," Ms Leach said.

A separate index measuring corporate expectations in Europe's biggest economy over a six-month horizon fell to 100.1.

This was the lowest since October 2014, suggesting many firms expect economic headwinds.

"Brexit had a stronger effect now," Ifo economist Klaus Wohlrabe told Reuters, adding that business expectations deteriorated the most in sectors with relatively strong ties to the British market, such as chemicals and cars.

A sector breakdown showed that the weaker headline figure was driven by deteriorated sentiment in manufacturing, wholesaling and retailing.

(Additional reporting Reuters)

Irish Independent

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