German Business Confidence Deteriorates Amid Heightened Risks

(Bloomberg) -- German business sentiment fell to its weakest level in almost three years as trade uncertainties and waning growth in China amplified concerns over the economic outlook.

The Ifo Institute’s gauge of corporate confidence in Europe’s largest economy fell to 99.1 in January from 101.0 in December. The fifth straight decline will increase doubts over Germany’s ability to recover from a slump in the second half of last year, especially after a separate report this week showed manufacturing unexpectedly shrank in January.

While European Central Bank President Mario Draghi said Thursday that a recession wasn’t a likely scenario, he offered a more gloomy economic assessment than just six weeks ago, when policy makers decided to cap stimulus. Risks to the outlook “have moved to the downside,” he said, citing protectionism and volatility in emerging and financial markets.

Key Insights

• “Disquiet is growing among German businesses,” said Ifo President Clemens Fuest. “The German economy is experiencing a downturn.”
• Expectations fell to lowest level since late 2012
• The report chimes in with a separate survey of purchasing managers that showed on Thursday German manufacturing entered its deepest slump in four years. New orders fell at the sharpest pace since 2012, with the auto industry and weaker demand in China cited.

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