German business sentiment as measured by the closely watched Ifo index sagged more than expected in August in another signal that Europe's largest economy is slowing.
The index fell to 108.7 for August from 112.9 in July, the Munich-based Ifo institute said Wednesday. Market analysts had expected a smaller drop to 111.0.
Germany's economy barely grew in the second quarter and fears about a global downturn, Europe's debt crisis and another recession in the U.S. are all weighing on business outlooks.
The index is based on a survey of 7,000 business executives about their views of current conditions and their outlook for the future. It is an important leading indicator for economists and market analysts.
The surveyed executives view current conditions as good but have sharply lowered expectations for the next six months, said Ifo president Hans-Werner Sinn. "The German economy cannot avoid the worldwide turbulence," Sinn said.
Germany reported only 0.1 percent growth in the second quarter, lower than expected, and the mood is further darkened by concerns that leaders of the 17 countries that use the euro are still struggling to contain a government debt crisis that has pushed Greece, Ireland and Portugal into taking international bailouts.
There are also worries about a possible second recession in the U.S., a key trade partner, and about cooling growth in emerging markets that have boosted Germany's export-oriented economy.
The outlook was down across all sectors of the survey: manufacturing, construction, wholesale and retail.
Economist Andreas Rees at Unicredit said that businesses are sensing a global easing of growth: "First of all, and most important, there is a synchronous global downswing in the making," he said, with growth less brisk in the BRIC countries: Brazil, Russia, India and China.
Additionally, recent sharp ups and downs on stock markets had influenced the outlook among businesses that actually make and sell things. "Risk aversion from financial markets started spilling over into the real economy, thereby making business managers more cautious," he said.
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