German economy close to recession
German business sentiment fell for a fifth straight month in September to its lowest level in nearly one and a half years, dampening expectations for a third-quarter rebound in Europe's largest economy.
The Munich-based Ifo think tank's business climate index, based on a monthly survey of some 7,000 firms, fell to 104.7 from 106.3. The Reuters consensus forecast had been for a milder decrease to 105.7.
"The German economy is no longer running smoothly," Ifo said. The survey showed sentiment worsening across all sectors of the economy.
The German economy steamed ahead at the start of the year thanks to an unusually mild winter that boosted construction activity. But it contracted by 0.2pc in the second quarter, leading some to warn of the risk of recession.
The crisis in Ukraine and a faltering European economic recovery are seen as the main factors behind the weakness.
Ifo economist Klaus Wohlrabe said after the release of the index that he now expects zero growth in Germany in the third quarter. For the full year, he said gross domestic product (GDP) was likely to expand by around 1.5pc.
"The euro zone's biggest economy has reached a dangerous stage between soft spell and longer-lasting almost-stagnation," said Carsten Brzeski, chief economist at ING.
While hard data has suggested the economy remains robust, sentiment indicators were more gloomy for months.