German business confidence has tumbled to its lowest level for 18 months, the latest sign that eurozone economic growth is slowing significantly from an already-modest pace.
The Munich-based Ifo institute said its business climate index had fallen for the third consecutive month, dropping to 93.3 from 94.0 in March. That was below analysts' forecasts and the lowest level since September 2003.
The Ifo survey is closely watched by financial markets and the European Central Bank. The latest drop will reinforce expectations that the ECB will leave interest rates unchanged, possibly until well into next year...
Economic growth in Germany and other eurozone economies is thought to have rebounded at the start of 2005 after a weak second half of 2004 but to have slowed subsequently as a result of high oil prices and the strength of the euro...
Germany is the eurozone's largest economy and its weak performance is dragging down the region's overall growth prospects. However fears are growing about the outlook for Italy, which some economists believe is in recession.
Not everyone is in sell mode, however.
Despite the gloomy German outlook suggested by the Ifo index, Andreas Rees, economist at HVB group, said there was “still a pretty good chance that at least we will have a moderate growth acceleration in the second half of 2005,” citing hints of a pick up in the retail sector.
Ralph Solveen, economist at Commerzbank in Frankfurt, added: “Given the special conditions strong growth in the world economy and historically low interest rates we think it is unlikely that this is the start of a downturn.”