FRANKFURT • German business sentiment deteriorated further to its lowest level in more than two years as trade tensions and the rising risk of a no-deal Brexit threaten to hamper a meaningful economic rebound from a summer lull.
The Ifo Institute’s gauge of corporate confidence in Europe’s largest economy fell to 101 in December from 102 in November. The fourth straight decline will add to concerns about economic prospects in Germany and the 19-nation euro-area after the European Central Bank (ECB) decided to rein in stimulus.
The report suggests Germany may have to overcome bigger hurdles than new emissions-testing rules, which hit the auto industry in the third quarter and led to a contraction in economic output. Gauges for current conditions and expectations both decreased.
“Across the board, we have a less optimistic scenario here,” Ifo president Clemens Fuest said in a Bloomberg TV interview. “We’re not seeing a downturn here, but certainly a cooling of the economy.” Worsening confidence will spark speculation whether the ECB was right to cap quantitative easing at €2.6 trillion (RM12.54 trillion).
While policymakers acknowledged last week that risks to the euro-area economy are rising, ECB president Mario Draghi also said domestic drivers of the expansion remain in place. According to a survey of Purchasing Managers’ Index, Germany’s private sector remained stuck in a phase of low growth in December. Order intake nearly stalled and sentiment softened.