Falling business morale points to weak German growth

Aerial view of containers at a loading terminal in the port of Hamburg, Germany - REUTERS

BERLIN (Reuters): German business morale fell by more than expected in November as a trade dispute between China and the United States weighed on Germany’s export sector and hurt the economy.

The Munich-based Ifo economic institute said on Monday its business climate index fell for the third month in a row to 102.0. This was lower than a Reuters consensus forecast of 102.3.

“Sentiment among German businesses weakened further this month,” said Ifo chief Clemens Fuest. “Companies scaled back their assessments of the current business situation albeit from a high level. Their business expectations also clouded over.”

He added that the economy would grow by 0.3% in the fourth quarter at most after contracting by 0.2% in the July-September period.

Reciprocal tariffs on goods imposed by the world’s two largest economies are hurting German companies that manufacture in both countries and export in both directions across the Pacific.

The tariffs are not only dampening the business outlook but are starting to leave their mark on Europe’s economic powerhouse, which has long depended on exports for growth.

Data last week showed that weaker exports were the primary driver behind the first quarterly contraction since 2015 and economists said there are clear signs that German growth was slowing.“The index’s fall is somewhat alarming,” Uwe Burkert of LBBW wrote in a note. “It was generally expected that the economic weakness of the third quarter would be corrected with a firmly positive growth figure in the fourth quarter.”

He added: “That optimistic picture has been damaged by today’s numbers.”