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German business morale steadies despite spectre of global trade war

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German business morale steadies despite spectre of global trade war
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BERLIN (Reuters) – German business confidence held steady in May after falling for five straight months, a survey showed on Friday, suggesting the mood among company executives in Europe’s biggest economy is steady despite the possibility of a global trade war.

The Munich-based Ifo economic institute said its business climate index held steady at 102.2, slightly beating a Reuters consensus forecast for a reading of 102.0.

An economist at Ifo said the domestic economy – particularly trade, construction and services – had been largely responsible for the stabilisation while there was “no euphoria” to be felt in the export sector, which has historically propelled the economy.

“The downward trend has stopped,” Wohlrabe told Reuters. “Above all, strength in the domestic economy contributed to the stabilisation of the economy … The global economic environment is difficult, but the German economy is holding its ground.”

But Andreas Scheuerle, economist at DekaBank, said the business climate’s downward trend was not over yet, adding: “The news that is currently raining down on companies really does not lend itself to creating a positive mood.”

He pointed to the possibility of U.S. import tariffs on autos and concerns about Italy’s new government but said that news had come towards the end of the survey period so would not weigh on the index until next month.

Germany, a major exporter, faces a host of risks including the prospect of U.S. import tariffs on aluminium and steel, a potential global trade war and the possibility that German firms conducting business in Iran will face sanctions after the U.S. decision to back out of the Iran nuclear deal.

Other recent data has painted a negative picture, showing economic growth slowing, investor morale remaining at its weakest level in more than five years and the mood among consumers worsening.

(Reporting by Michelle Martin; Editing by Paul Carrel, Larry King)

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