German business climate hits 15-year low

German business climate hits 15-year low
Photo: DPA
A key survey of Germany's corporate mood on Friday showed manufacturers and retailers, faced with a slowing economy and the global financial crisis, are gloomier than they have been in 15 years.

The monthy business climate index put out by the Ifo economic research institute fell from 90.2 points in October to 85.8 points in November, the lowest number since February 1993. The index, which polls around 7,000 firms, is considered the most important business sentiment reading in Germany, Europe’s largest economy. November’s fall was the sixth straight drop in a row for the index.

The drop was more severe than the forecasts of many experts surveyed beforehand, who had predicted a drop to 89.0 points.

The companies polled complained of the difficulty of their current business situation and were sceptical about the outlook for 2009.

With falling numbers of orders, many firms could start laying off workers, Klaus Abberger of the Ifo Institute told the DPA news agency. “I’d say we’ll make it through the winter OK, but it’s going to get increasingly difficult in the spring,” he said.

According to analyst Rainer Sartoris of HSBC Trinkaus, the index shows plainly “that there’s little hope that we’ll see an end to the economic hard times in the coming year,” he told the DDP news agency.

Like him, most analysts expect a contraction of the German economy in 2009, the only disagreement is by how much.

The Cologne-based German Institute for Business Research forecasts that the economy will shrink by 0.5 percent. The survey shows that “export and investment expectations have been dampened,” the institute’s director Michael Hüther told DDP. At the beginning of October, the institute had forecast that the economy would grow in 2009 by 0.6 percent.