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Business confidence slack as growth slows

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Business confidence slack as growth slows
A worker puts the finishing touches to BMWs at the car producer's Regensburg, Bavaria production line. Photo: DPA
11:14 CEST+02:00
German business confidence slipped fractionally from its previous high level in May, as the upturn in Europe's biggest economy continues, the Ifo economic institute said Friday.

The Ifo institute's closely watched business climate index eased slightly to 108.5 points this month from 108.6 points in April, the think tank said in a statement.

It was the first time since September that the index has fallen and analysts had been expecting a slightly bigger drop.

But Ifo president Hans-Werner Sinn insisted that the development was no cause for concern.

"Companies were once again more satisfied with their current business situation, but expressed slightly less optimism about the months ahead. The German economy remains on track," he said.

Ifo calculates its headline index on the basis of companies' assessments of the current business environment and the outlook for the next six months.

The sub-index measuring current business rose to 114.3 points, the highest level since June 2014, while the outlook sub-index slipped by 0.4 point to 103.0 points, the institute said.

Some of the slip in confidence may have been due to a slowdown in GDP growth.

Figures from the federal statistics office Destatis showed on Friday that gross domestic product (GDP) expanded by 0.3 percent in price, calendar and seasonally adjusted terms in the first quarter, slower than the 0.7 percent seen in the preceding three months.

The data confirmed a preliminary estimate published last week.

"The German economy continued on its growth path, but with a slightly weaker momentum" in the first quarter, Destatis said.

The main growth driver was domestic demand, with both private household spending rising by 0.6 percent and public-sector spending by 0.7 percent.

Investment also increased, particularly in construction, where it rose by 1.7 percent, and equipment, where it grew by 1.5 percent.

Exports increased as well, expanding by 0.8 percent. But because imports rose almost twice as fast (1.5 percent), the overall net effect from foreign trade was negative, shaving 0.2 percentage points off growth, Destatis said.

On a 12-month comparison, GDP grew by 1.1 percent in the January-March period compared with the same three months a year earlier, Destatis said.

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