BERLIN (Reuters) - German business confidence deteriorated for a second straight month in March, dropping to its lowest level in nearly a year, as managers in Europe’s largest economy became more concerned about the rising threat of protectionism.
The Munich-based Ifo economic institute said on Thursday that its business climate index, based on a monthly survey of some 7,000 companies, fell to 114.7 from 115.4 in February.
The reading, an 11-month low, undershot the expectations of analysts polled by Reuters, whose consensus forecast was 114.8.
“The threat of protectionism is dampening the mood in the German economy,” Ifo chief Clemens Fuest said.
German managers were less satisfied with their current business situation, which nevertheless remained at a high level, Ifo said. Firms were also less upbeat about the coming months.
“The protectionism debate is leaving its mark,” Ifo economist Klaus Wohlrabe told Reuters, adding that export expectations fell to their lowest levels in more than a year.
Unicredit economist Andreas Rees said U.S. trade policies had increased uncertainty. “But there’ll be robust growth in the months ahead - even if the German economy probably has surpassed its peak,” Rees said.
A sector breakdown of the Ifo figures showed the main drag came from retailing and manufacturing. Business sentiment improved in construction.
The Ifo data chimed with HIS Markit’s latest survey among purchasing managers, which showed growth in Germany’s private sector lost a little steam in March as factory output slowed.
HIS Markit economist Chris Williamson said that the outlook for exporters had been clouded by U.S. President Donald Trump’s decision to impose import tariffs on steel and aluminum, as well as the recent appreciation of the euro.
However, the overall high readings of the PMI survey also suggested that Germany’s upswing is likely to continue.
“We’ll probably see a strong first quarter with a growth rate of around 0.7 percent,” Williamson said. This compares with a growth rate of 0.6 percent on the quarter in the last three months of 2017.
Economic advisers to the German government on Wednesday raised their 2018 growth forecast to 2.3 percent but warned that protectionist measures could limit the upswing.
The Ifo institute is even more optimistic, with its researchers confirming their forecasts - originally made in December - of 2.6 percent German growth this year and 2.1 percent in 2019.
Reporting by Michael Nienaber, editing by Larry King