Germany: Business confidence falls to an over two-year low at the close of the year
December 18, 2018
Business confidence declined for the third consecutive month in December, with the headline figure dropping from 102 in November to 101 in December. As a result, the index remained above the crucial 100-point mark that separates optimism from pessimism. However, the December’s result marks the lowest reading since September 2016.
A sector-by-sector breakdown revealed that sentiment in three of the four sectors deteriorated. The drop in the manufacturing sector was noticeable and came on the back of a deterioration in business expectations, which entered negative territory for the first time since May 2016. Sentiment on the current sentiment eased slightly but remained elevated. A broad-based worsening was recorded in the service sector as firms became less optimistic about both the current and future business environment. In the trade sector the easing of confidence was less marked and reflected an improvement in the wholesaling subsector offsetting a drop in the retailing subsector. On the other hand, business sentiment in the construction sector was unchanged from the prior month’s high level. This reflected a slight drop in business expectations and a slight improvement in the assessment of the current business environment.
Carsten Brzeski, chief German economist at ING, commented: “Since the summer […] the German economy has entered a dangerous vicious circle of too many one-off factors, dwindling global growth and political risk finally leaving their mark. The list of explanations for the underperformance of the economy in 2018 is at least as long as teenagers’ lists of explanations for why they could not tidy up their room.”
Germany Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists expect gross fixed investment to expand 2.8% in 2019, which is down 0.1 percentage points from last month’s forecast. In 2020, the panel sees investment growth moderating to 2.6%.
Author: Jan Lammersen, Economist