–Adds Manufacturing, Construction, Retail/Wholesale and Services

Sep MNI analysts survey Aug Jul
median range
————————————————————————
Business sentiment: 107.5 106.3 104.0 – 108.9 108.7 112.8
Current conditions 117.9 115.5 115.0 – 118.1 118.1 121.3
Six-month outlook: 98.0 97.1 95.0 – 101.1 100.0 104.9
—

FRANKFURT (MNI) – Business morale in Germany fell in September to
its lowest level since June 2010, with businesses revising down their
assessments of both the current situation and the near-term outlook in
Germany, the Ifo institute reported on Monday.

After a 5.7-point slide since June, Ifo’s overall sentiment
indicator fell another 1.2 points to 107.5. A majority of analysts,
however, had expected a sharper decline in the sentiment index.

The current business situation index ticked down an almost
negligible 0.2 point to 117.9, its lowest point since the start of this
year but nonetheless well above analysts’ expectations.

Respondents assessed the present “just as positively as in the
previous month,” Ifo President Hans-Werner Sinn said in a press release.
“The continuing favourable situation of companies shows that the German
economy has so far managed to decouple from political turbulence.”

The drop in expectations, however, was more pronounced, with the
sub-indicator losing two points to 98.0, a 26-month low.

In manufacturing, sentiment fell 4.9 points to 10.6, extending the
run of consecutive declines to seven months, as firms have grown more
pessimistic regarding the near-term future.

Companies “expect no further impulse from their export business,
(but) still plan to increase the number of employees,” the Ifo press
release read.

Sentiment in the construction sector also took a hit, knocking the
sub-indicator to a nine-month low of -9.9 in September, “due entirely”
to lowered expectations.

“The current situation, however, was rated by the polled companies
as somewhat more favourable than in the previous month,” Ifo’s Sinn
noted.

Conversely, morale in both retailing and wholesaling recovered on
the month, with the sectors’ view of both their current situations and
six-month outlooks improving.

However, the Ifo services sentiment indicator slipped from August’s
19.7 to 16.5 in September, weighed down by a sharp drop in expectations.
“The firms’ plans to hire additional staff are not as expansive as in
previous months,” Ifo noted.

The weaker Ifo figure is the latest in a string of recent
indicators pointing to an economic slowdown as global activity cools and
European officials continue to debate how to resolve the sovereign debt
crisis.

Near-stagnant activity and falling demand in the private sector
knocked the September German composite PMI (50.8) to its weakest level
in 26 months. “September’s flash PMI data suggest that the recovery in
Germany’s private sector economy is teetering on the brink,” said Markit
Senior Economist Tim Moore.

“The outlook for the final quarter is also looking increasingly
bleak, not least because the recent trend in new orders has been even
weaker than that for output, especially in the manufacturing sector,”
Moore said.

The ZEW’s investor confidence indicator also lost ground in
September, falling to a 33-month low. “The economic outlook is
characterized by a high degree of insecurity which — according to the
financial market experts — undermines investor and consumer sentiment,”
said ZEW President Wolfgang Franz.

Domestic output should recover somewhat in 3Q, the Bundesbank
predicted this month, citing strong retail sales and new car
registrations. However, medium-term prospects are clouded by the sharp
declines in equity markets and a general deterioration in economic
sentiment, the central bank cautioned.

The International Monetary Fund has revised down its projection for
German GDP growth this year to 2.7% and expects a further slowdown to
1.3% in 2012.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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