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Slowdown in global economy hits German economic confidence


Angela Merkel

Angela Merkel

Angela Merkel

German business confidence fell sharply this month, hit by the renewed eurozone crisis and a global economic slowdown including in China.

Germany's ZEW economic think-tank said its monthly survey of economic sentiment fell to 36.3 points from 48.5 in March, and worse than most economist had predicted.

"There is increasing evidence that there are growth risks," ZEW president Clemens Fuest said.

"There has been some disappointing data coming from China, from US labour markets, from German exports. There have been some doubts about the strength of the recovery and some people think there is now confirmation of that."

A particularly strong decline in export-related industries in Germany, such as the automotive sector, had a particularly damaging impact.

Output shrank

Germany's economy slowed in 2012 and output shrank by 0.6pc in the final quarter. But economists still expect Europe's biggest economy to avoid recession by returning to weak growth in the first three months of this year.

Still, weak data in recent weeks has raised fears that Europe's powerhouse may be faltering. Imports and exports fell sharply in February, and industrial output has been lacklustre.

A significant slowdown in Germany could be a headache for conservative leader Angela Merkel, who hopes to clinch a third term as chancellor in an election in September.

"The chickens are coming home to roost for economic confidence in Germany," said David Brown of New View Economics.

"The problems are starting to pile up for business, with the debt crisis in Cyprus, eurozone recession and slowdown in China all taking a greater toll on sentiment," he said, adding that confidence that German business could shrug off downside risks was looking increasingly misplaced.

In addition, worries about the eurozone crisis have resurfaced. Portugal is having to rethink some austerity policies after a constitutional court ruling while Cyprus is being bailed out after a messy debate over how hard to hit bank depositors. (Reuters)

Irish Independent