German business confidence slumps

Business confidence in Germany dropped again in July as companies grow increasingly pessimistic about the fallout from the eurozone debt turmoil, data showed on Wednesday. The Ifo economic institute's closely watched business climate index dropped to 103.3 points in July from 105.2 points in June, a slightly steeper decline than analysts had been expecting. Economists polled by Dow Jones Newswires had pencilled in a drop to 104.5 points this month. It is the third month in a row that the index has fallen. "The euro crisis is having an increasingly negative impact on the German economy," said Ifo president Hans-Werner Sinn. "The business climate in manufacturing deteriorated significantly. More specifically, manufacturers assessed their current business situation much less favourably than last month." He said manufacturers were also downbeat about the business outlook although other sectors of Europe's top economy provided some solace. "Developments in retailing offer a ray of hope, as the business climate indicator continued to rise at this level of trade," Sinn said. "Retailers assessed both their current business situation and their six-month business outlook more favourably." Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months, with 100 being the long-term average. The sub-index measuring the current business situation fell to 111.6 points in July from 113.9 points in June, while the outlook sub-index dropped to 95.6 points from 97.2 points. "July's Ifo index will add to the growing concerns over the health of the German economy," said Jonathan Loynes, chief European economist at Capital Economics. "The Ifo is not the best indicator of overall economic growth but, on past form, the BCI (business confidence index) points to broadly stagnant GDP (Gross Domestic Product)."