— Adds Details On Sectors

Oct MNI analysts survey Sep Aug
median range
————————————————————————
Business sentiment: 100.0 101.6 100.6 – 102.1 101.4 102.3
Current conditions 107.3 109.8 109.0 – 110.5 110.3 111.1
Six-month outlook: 93.2 93.8 91.9 – 95.0 93.2 94.2
—

FRANKFURT (MNI) – Germany’s business climate unexpectedly eroded
further in October to its weakest level since February 2010, as firms
continued to revise down their assessment of the current situation, the
Ifo institute reported Wednesday.

Extending the run of declines to six months, the business climate
index shed 1.4 points to 100.0, undershooting even the most pessimistic
forecasts. Most analysts had expected a mild recovery, with an MNI
survey median forecast of 101.6.

“The clouds over the German economy are darkening,” Ifo President
Hans-Werner Sinn said in a press release.

Companies’ assessment of the present situation fell for the fourth
consecutive month to a 28-month low of 107.3. The six-month outlook was
unchanged at 93.2.

In the manufacturing sector, sentiment fell for the second month in
a row, shedding 2.9 points, as further weakness in the current situation
component offset the slight recovery in the short-term outlook.
Respondents reported capacity utilisation falling for the third time in
a row and “considerably lower” compared to the previous quarter.

Construction morale also continued to deteriorate, hitting its
lowest point in a year, as the indicator declined by 1.8 points.
Respondents were less pessimistic on the short-term outlook, but “far
less satisfied” with the current environment, Ifo noted.

Sentiment in wholesaling fell back into negative territory in
October, giving back 3.3 points to hit a 32-month low, as a slight
improvement in the six-month outlook was not enough to counter the
downward revision of the current situation.

Retailing morale also fell back, dropping 1.8 points to a 31-month
low on the back of worsening expectations, which offset a more positive
view of the current situation.

Keeping with the trend, morale among service providers fell back in
October, giving back five points after September’s 1.4-point recovery.
Weakness was noted in the current situation and the expectations
components, both down five points. Expectations were negative for the
first time since June 2009, Ifo noted.

“Employment plans in the sector nevertheless remain slightly
expansionary,” the institute added.

The unexpected deterioration in business sentiment is disappointing
and adds to signals for a further economic deceleration in the months to
come amid subdued demand and ongoing uncertainty regarding the Eurozone
debt crisis.

Released earlier today, the flash October PMI polls showed a faster
decline in new factory orders, especially in export markets and the
automotive sector.

A separate survey by the ZEW institute this month showed that
analysts on balance expected “the German economy to cool down instead of
brightening up” in the months ahead.

The Bundesbank has forecast stagnation or a slight contraction of
activity in the fourth quarter after ongoing growth in the third. It
attributed the pick-up in industry this summer in part to some auto
plants not cutting shifts as would normally be the case – an effect
which will fall off in the fourth quarter.

“Declining demand for industrial goods will become more noticeable”
in the fourth quarter, while weakening new orders suggest “that a
moderation in production could be imminent,” the central bank said.

— Frankfurt bureau: +49 69 720 142; email: twailoo@mni-news.com —

[TOPICS: M$G$$$,MT$$$$,M$X$$$,M$XDS$,MAGDS$,MTABLE]