Connect with us

Hi, what are you looking for?

Capital Business
Capital Business
German investor confidence has slumped following Britain's decision to leave the European Union/AFP

Finance

German firms see Brexit clouds approaching

German investor confidence has slumped following Britain's decision to leave the European Union/AFP

German investor confidence has slumped following Britain’s decision to leave the European Union/AFP

FRANKFURT, Germany, Aug 25 – Germany is waking up to the threat of Brexit and could see weaker growth in 2017, analysts said on Thursday, after a key business confidence survey showed a sharp decline.

The Ifo economic institute’s closely-watched index fell to 106.2 in August from its July level of 108.3, reaching its lowest point since December 2014.

Analysts surveyed by Factset had been expecting a slight rise to 108.5.

“The German economy has fallen into a summer slump,” Ifo president Clemens Fuest said in a statement, noting that all sectors surveyed except construction had reported a drop in the index.

August’s sharp drop contrasts with a smaller decline in July, when German business surprised forecasters by appearing to shrug off anxiety over Britain’s late-June vote to quit the European Union.

The latest correction was all the more unexpected after an investor survey by the ZEW institute in mid-August showed a recovery from the huge Brexit slump in confidence in July.

Ifo’s headline figure is produced from two figures representing companies’ feelings on the current business environment and the outlook for the next six months.

The sub-index measuring current business fell to 112.8, two points below its July level.

Confidence in the future outlook also took a two-point blow, falling to 100.1 from 102.1 in July.

Manufacturers, retailers and wholesalers all reported falling confidence in August.

Advertisement. Scroll to continue reading.

Chemical and electrical firms were among the gloomiest in industry, Ifo chief Fuest said, while food and beverage firms were the least positive among retailers.

But one bright spot was construction, where firms had a more optimistic view of the coming months even as their view of current business clouded over.

Germany’s DAX stock market index of 30 leading firms had fallen 1.36 percent by 0900 GMT on Thursday as investors absorbed the news, with every single blue-chip firm’s shares losing value.

Wake-up call

“Today’s Ifo suggests that German businesses have suddenly woken up to Brexit reality,” economist Carsten Brzeski at ING Diba bank said, noting that the index often takes time to respond to global events.

While Germany’s run of good economic news has so far been sustained by high government spending on refugees and strong appetites for consumption among households, investment remains weak, he went on.

“There is a risk that the Ifo will fall further,” warned Stephen Brown of Capital Economics, noting that the boosts to German firms from low oil prices and a weakening euro are fading.

While confidence is stronger than it was in February, when fears of a slowdown in China sent ripples around the world, it still points to a slowdown in German economic growth in 2017, Brown said.

Germany’s Bundesbank (central bank) predicted GDP growth of 1.7 percent for 2016 and 1.4 percent for 2017 in a forecast released in early June well before the Brexit referendum.

Advertisement. Scroll to continue reading.
Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Headlines

NAIROBI, Kenya, Mar 16 – The World Bank has given the Kenyan government USD 60 Million (Sh6.1 billion) to help combat the deadly coronavirus pandemic...