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German business confidence deteriorates more than expected in February - Ifo
German business confidence deteriorated more than expected in February, according to a widely-followed survey released on Thursday.
The Ifo business climate index fell to 115.4 from 117.6 in January, missing expectations for a reading of 117.0 but still at its second highest level since 1991.
Meanwhile, the current assessment index dropped to 126.3 from 127.8, coming in below forecasts of 127.0. The expectations index declined to 105.4 this month from a downwardly-revised 108.3 in January, below expectations of 107.9.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "A poor headline, adding weight to the more pessimistic message from the headline surveys this month. The big decline in the expectations index stands out, and we should be watching it closely in coming months. It still signals robust growth, but if this rate of descent continues it would be a worry for the Q2 and Q3 data.
"The industry details also were downbeat, albeit less so. The construction and retail sentiment indices fell, but signals decent growth in both sectors."
Stephen Brown, European economist at Capital Economics, said the drop in Ifo business sentiment suggests that German GDP growth is nearing its peak, but should remain strong.
"Weaker expectations could reflect a number of factors, not least the relatively strong euro, signs of slowing demand from China and the drop in German equity prices earlier this month.
"On the basis of the long-run historical relationship, the Ifo now only points to a slight rise in annual GDP growth from Q4's 2.9%. And as the indicator has overstated growth in recent quarters and is on track to record its first fall in eight quarters in Q1, it might be more accurate to say that growth is close to its peak. Nevertheless, growth of close to 3% would still be very strong by German standards. And once a government is formed, a small fiscal boost should help to ensure that healthy growth rates are sustained. We therefore maintain our forecasts for above-consensus German GDP growth of 2.7% this year and 2.0% next."