Germany Struggles as EU Fails

Germany Struggles as EU Fails

German business confidence fell to a nearly three-year low in January, a closely-watched survey said Friday, in the latest sign of waning momentum in Europe’s top economy.

The Munich-based Ifo institute’s monthly barometer slipped to 99.1 points from 101.0 in December, to hit its lowest level since February 2016.

The decline was worse than analysts surveyed by Factset had predicted and underscored mounting concern about a global economic slowdown.

“Disquiet is growing among German businesses,” Ifo chief Clemens Fuest said in a statement.

The survey of some 9,000 firms found that companies were less satisfied with their current situation than last month.

They were also notably more worried about the future, with business expectations turning “pessimistic for the first time since December 2012”.

The Ifo reading was the latest in a slew of disappointing indicators for Europe’s export powerhouse, suggesting that the weakness seen late last year has dragged into 2019.

The German economy suffered in the fourth quarter of 2018 from one-off factors like low water in the Rhine river that slowed shipping and new emissions tests that hindered the car industry.

External risks like Brexit, stuttering Chinese growth and US-led trade tensions are also weighing on the minds of company bosses.

The Ifo data “will do nothing to allay concerns that the German economy is stalling”, said Capital Economics analyst Andrew Kenningham.

The survey comes a day after European Central Bank chief Mario Draghi warned that risks to the eurozone economy “have moved to the downside”.

The International Monetary Fund this week downgraded its 2019 growth forecast for Germany to 1.3 percent, 0.6 points lower than its previous estimate.

The German economy ministry is also expected to slash its projections for this year, Handelsblatt financial daily reported.

In an annual report due Wednesday, the ministry will forecast an economic growth rate of 1.0 percent for 2019, well below an earlier estimate of 1.8 percent, according to the newspaper.

“The question now is whether the forecasts should be cut even further,” Kenningham said.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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