Geopolitical crises drag down Ifo business sentiment index

Geopolitical crises drag down Ifo business sentiment index
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German business sentiment fell to its lowest level in nine months in July.

Surveys by the Ifo economic think tank for their business climate index showed companies worried about the crises in Ukraine, Iraq and Gaza.

Ukraine is a particular worry with more than 6,000 German firms active there.

German exports to Russia dropped by 14 percent in the first four months of the year, and the Committee on Eastern European Economic Relations has warned that the decline in trade is putting around 25,000 jobs at risk in Germany.

Christian Schulz, senior economist at Berenberg Bank, believes Germany is the best-placed country in Europe to deal with the effects of the Ukraine crisis.

“Rising household incomes boost potential consumer demand, and recovering global demand growth should easily offset the weakness in trade with Russia,” he said.

The German economy grew at its strongest rate in three years in the first quarter largely due to mild weather boosting construction, but economists generally expect it to be weaker in the second quarter before picking up in the third.

Recent hard backward-looking data has been subdued, with industrial output, orders, exports and imports all falling. Investor sentiment has also taken a turn for the worse, though the private sector has grown.

with Reuters