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(CEP News) Frankfurt - According to Germany's Ifo Institute for Economic Research, the business climate indicator for Germany fell to 97.5 in July, down from both the 100.1 level expected and the 101.2 figure recorded in the previous month. June's reading was revised down from an initial figure of 101.3.
Looking at the sub-components of the indicator, the current assessment slid all the way to 105.7 from 108.3. Economists had expected a more moderate fall to 106.5 for the month. At the same time, the expectations component declined to 90.0 against forecasts of a 93.2 print for July. The previous month had recorded an expectations level of 94.6, revised down from 94.7 previously released. "The firms are much more dissatisfied with their current business situation and they are clearly more reserved regarding the six-month outlook," Ifo President Hans-Werner Sinn said in a pres release. "These results suggest that the economic upswing is coming to an end." Despite the stronger-than-expected fall in the business climate indicator, Ifo survey coordinator Klaus Abberger said that there was no danger of a recession in Germany. However, he did acknowledge that the economy was cooling considerably and that he expected weak household expenditure figures for 2008. Abberger also forecast weakness in German exports. However, he stopped short in saying that a slump was expected. Ifo senior economist Gernot Nerb also provided comments after the release of the Ifo indicator and noted declines in all components of the Ifo figure. He stressed that high oil prices were a burden for the German economic outlook. However, he also conceded that the recent falls in oil prices have not yet been reflected in business sentiment and that the declining price level may positively affect future Ifo figures. Nerb added that he saw no reason for the European Central Bank to change interest rates and recommended that the central bank keep rates on hold. By Todd Wailoo,
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