Europe

German business morale down on supply shortages, virus fears

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The skyline with the financial district is photographed during sunset in Frankfurt, Germany, April 22, 2020, as the spread of the coronavirus disease (COVID-19) continues. REUTERS/Kai Pfaffenbach/File Photo

BERLIN, July 26 (Reuters) - German business morale fell unexpectedly in July on continuing supply chain worries and amid rising coronavirus infections, a survey showed on Monday.

The Ifo institute said its business climate index fell to 100.8 from a revised figure of 101.7 in June. A Reuters poll of analysts had pointed to a July reading of 102.1.

"The mood in the German economy has been dampened," Ifo President Clemens Fuest said in a statement.

Supply problems are weighing on the manufacturing and the retail sectors, with almost 64% of industrial firms complaining about shortages in materials, according to the institute.

Companies gave a slightly better assessment of their current situation, but optimism with regard to the coming months waned.

The Ifo expectations index fell to 101.2 from 103.7 in June, while the current conditions index rose to 100.4 from 99.7.

Events including the COVID-19 pandemic, natural disasters in China and Germany and cyber attacks have conspired to drive global supply chains towards a breaking point, threatening the fragile flow of raw materials, parts and consumer goods, according to companies, economists and shipping specialists.

The tourism and consumer sectors were especially worried about a fourth coronavirus wave.

After more than two months of steady decline, COVID-19 cases have been rising in Europe's biggest economy since early July, due mainly to the spread of the more infectious Delta variant.

Roughly 60% of Germany's 83 million people have had a first shot of a COVID-19 vaccine and about half of them are fully vaccinated.

Reporting by Kirsti Knolle; Editing by Maria Sheahan

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