Sunday, August 26, 2012

German business climate outlook report 8/27/2012

German business climate outlook report 8/27/2012 : the Ifo Institute for Economic Research is to release a report on German business climate, a leading indicator of economic health.

A slew of data next week will show how badly Germany has been scarred by the euro zone crisis as its companies fear for key European export markets and the only vital support comes from consumers.

Three years into the debt crisis, growth in Europe's largest economy slowed in the second quarter of 2012 to 0.3 percent and a string of increasingly gloomy data has even raised the possibility of a second-half contraction.

Ifo business climate index, Germany's most influential leading indicator of economic health, is forecast to slip for the fourth month in a row, confirming a change in trend.

"The economy has slowed significantly. The
German economy will likely weaken slightly in the second half," said Commerzbank economist Ralph Solveen. "For a long time the debt crisis seemed not to bother German businesses. Only in the last three months Ifo has fallen significantly."

Ifo, seen down at an almost 3-1/2 year low of 102.6 from 103.3 in July, should confirm what hard data from the Purchasing Managers' Indicator (PMI) already showed this week: Germany's hitherto steady resilience to the crisis is waning.

Orders from abroad for Germany's manufacturing goods, a mainstay for the economy, fell this month at the fastest rate since April 2009. That will likely be reflected in Ifo's sub-index on business expectations, which is also seen dropping for a fourth consecutive month.

The slowdown carries risks for German Chancellor Angela Merkel as she seeks a third term in office next year and could tie her hands when it comes to bailing out indebted peers, especially if a nascent rise in unemployment accelerates.

For August, unemployment is expected to stay at 6.8 percent, still near post-reunification lows but following four months of rises in the number of people out of a job. Jobless data are due on Thursday.

While businesses are feeling the pain, consumers have so far continued to spend, mostly on big-ticket items, as low interest rates make saving unattractive. The GfK consumer sentiment survey, due out on Tuesday, is expected to be unchanged going into September after inching higher a month earlier.

Inflation is expected to tick up to 1.8 percent - or 2.0 using the EU measure - but policy makers do not see that as a risk to the economy.

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