Europe News

German business morale falls for first time since April

A worker is lifted by a crane at a construction site for a shopping mall in Berlin.
John MacDougall | AFP | Getty Images

Confidence among German businesses showed an unexpected fall in October as concerns over a strong euro and a U.S. government shutdown resolved earlier this month took their toll.

The widely watched Ifo business climate data for Germany, the first drop in six months, showed business morale fell to 107.4 from 107.7, missing forecasts.

Firms assessed their business outlook slightly less optimistically than last month and were also less positive about the current business situation, but the figures remain above average.

"The German economy has not yet moved fully into gear," the Munich based think tank which releases the data said in a press release on Friday.

Carsten Brzeski, senior economist at ING said the drop is a good reminder that German invulnerability might not last forever.

"The German economy remains in good shape. The solid labor market and recovering industrial activity bode well for stable growth in the coming quarters. The external environment, however, gives rise to some new caution," he said in a research note.

"The U.S. debt crisis and its possible fallout on economic activity, combined with the stronger exchange rate are not the most favorable mix for the German export sector. Even though the German economy has become less dependent on its exports in recent years, due to solid domestic demand, strengthening exactly this immunity should be one of the main challenges for the next German government."

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