Worries about global economy send German optimism lower

BERLIN – A key indicator of where the German economy is headed fell for the third month in a row as fears take hold about global growth.

The Ifo institute said Tuesday that its closely watched confidence index fell to 105.7 points for February from 107.3 last month. Economists had forecast a smaller slip to 106.8.

While businesses’ assessment of their current situation improved, their outlook for the next half-year was significantly worse.

Economist Carsten Brzeski at ING-DiBa called the reading a “wake-up call.”

“Global events have finally reached German companies’ boardrooms,” he wrote in an email research note.

The survey indicated German executives share worries about the global economy that have sent financial markets lower recently. China’s economy is slowing down, with unpredictable consequences for the rest of the world, while low oil and commodity prices have hit emerging market economies that supply much of the world’s growth these days.

The Ifo index is valued as a leading indicator, meaning it is a guide to where the economy is going in the months ahead.

Germany, the biggest economy in the 19-country euro currency union, is currently enjoying low unemployment of 4.5 per cent and steady growth amounting to 0.3 per cent in the fourth quarter of last year. While exports have slowed, spending by consumers and the government has picked up.

The survey is based on monthly responses from about 7,000 firms in Germany, Europe’s biggest economy.