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Brexit hits German business morale, Ifo plunges

Thursday, August 25, 2016 - 01:29

German business morale deteriorated sharply in August in a sign that Brexit has weighed more heavily on sentiment among executives. David Pollard reports.

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It's been a relatively smooth road for the German economy in recent months, but is there now a bump? The closely-watched IFO survey dropped sharply in August. Its business climate index at 106.2 - that's below forecasts and the sharpest monthly fall since 2012. The bump, says IFO, could have a capital B for Brexit. SOUNDBITE (Germany) KLAUS WOHLRABE, IFO, SAYING: "We particularly see in industry sectors that are close to the United Kingdom, like carmakers and chemicals, that the index has sharply contracted, notably where fewer exports might be possible in the future." A separate reading measuring corporate expectations in Europe's biggest economy over a six-month horizon fell to its lowest in nearly two years. (SOUNDBITE) (English) FXPRO, HEAD OF RESEARCH, SIMON SMITH, SAYING: "With Brexit we're in a long game which will take several years ... So that means there could well be more to come. And we know that the Bank of England has substantially revised down growth forecast for next year, and that could impact Germany as well." Construction and tourism are both buoyant. But manufacturing, retailing and wholesaling all suffer in the survey. Analysts point to a steep drop in capex highlighted in the latest GDP data. That and a lack of structural reform meaning, they say, a German economy increasingly dependent on two sets of unusual stimulus: extra spending on migrants - and cheap money from the ECB.

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Brexit hits German business morale, Ifo plunges

Thursday, August 25, 2016 - 01:29