Economy

German business confidence dips again as economy cools

Key Points
  • A key business climate survey has shown a third consecutive dip in German business confidence.
  • The ifo’s sub-measurement of uncertainty among German businesses had risen at its fastest level in 10 years.
  • The ifo Business Climate is based on roughly 9,000 monthly survey responses from firms in manufacturing, service sector, trade and construction.
Employees work on the assembly line inside the Volkswagen factory in Wolfsburg, Germany, on May 20, 2016.
Krisztian Bocsi | Bloomberg | Getty Images

The German economy is cooling down. That is the standout assessment from a key business climate survey, published by the Munich-based Ifo Institute on Monday.

The Ifo Business Climate Index fell to 102.0 points in November from 102.9 points in October, marking its third consecutive decrease.

Speaking to CNBC's "Street Signs" shortly after the release, the institute's president, Clemens Fuest, said sentiment among German businesses had obviously weakened as activity had slowed.

"There are clear signs that the long upturn is ending, the Germany economy is cooling down," he said by phone.

German business uncertainty sees sharpest rise in a decade, ifo president says
VIDEO2:2002:20
German business uncertainty sees sharpest rise in a decade, ifo president says

Fuest said while an introduction of new emissions standards for Germany's auto sector was an important factor in the economic deceleration, there was also evidence of a wider structural slowdown across all sectors.

"It is broader, and this reflects that the world economy is cooling down. There are some risk factors such as the situation in Italy and Brexit," he added.

The economist said the ifo's sub-measurement of uncertainty among business had risen at its fastest level in 10 years, reflecting current concerns over geopolitics.

Fuest said he expected most German companies would sit tight on any investment, particularly those affected by the U.K.'s impending departure from the European Union.

Despite Germany's position as Europe's biggest economy, the euro currency strengthened in Monday morning trade. This as traders focused on news that Italy may agree to address its contentious budget plan as well as the weekend signing of the Brexit deal between the EU and the U.K.

‘Unlikely’ ECB will be able to hike rates in 2019, Rabobank strategist says
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‘Unlikely’ ECB will be able to hike rates in 2019, Rabobank strategist says

Speaking to "Street Signs" earlier Monday, Jane Foley, head of FX strategy at Rabobank, said that while the Ifo report could have been worse, there was little in it to please euro bulls.

"There is some hope in the market that German Q4 data will be better, potentially led by the auto sector, but maybe this data isn't as robust yet to really encourage those expectations," she said.

Foley said current growth data across the euro zone countries would make it tough for the European Central Bank to raise interest rates in 2019.

The Ifo Business Climate is based on circa 9,000 monthly survey responses from firms in manufacturing, the service sector, trade and construction.