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Posted on : Thursday 2nd July 2020 04:01 PM

German Business Outlook Darkens Amid Trade Slowdown

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An index of German business optimism dropped in April as Europe's largest economy problems with a slowdown in trade and manufacturing while it finds support from a strong labor market.


The Ifo institute said Wednesday its business situation index slipped to 99.2 points from 99.7 points in March, showing managers were less content with both the current situation and the outlook for the future.


The survey was more serious than forecast by market analysts, who had predicted a slight increase.


"This is consistent with our view that Germany's economy is likely to grow at a very anemic pace this year, even if there is a slight pickup in growth" in the first quarter, stated Andrew Kenningham, chief Europe economist at Capital Economics.


German's economy experienced flat growth following last year in spite of low unemployment that has helped keep consumers spending. The jobless percentage was only 3.1 percent in February. The slowdown was blamed on one-time factors such as troubles in the auto industry over new emissions standards and low river levels that disrupted production. Slowing global trade has held back export-oriented manufacturing.


The government on April 17 cut its growth forecast for the full year to 0.5 percent.


A lesser pessimistic view was taken by Carsten Brzeski, chief economist at ING Germany. He stated the picture in industry wasn't as terrible as some recent data would indicate. Recent zig-zagging of indicators "should be seen as evidence of a bottoming out — confusion as a sign of stabilization," he composed in an email.


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