By GEIR MOULSON, Associated Press
BERLIN (AP) — Business confidence in Germany dropped further than expected in July as worries about the impact of Europe's debt crisis on the region's biggest economy deepened, a closely watched survey showed Wednesday.
The Ifo institute's confidence index fell for the third consecutive month, dropping to 103.3 points in July from 105.2 in June. The reading was the lowest since the index stood at 102.0 in March 2010. Economists had expected a more modest decline in the index to 104.5.
Ifo said that businesses' assessment of their current situation and their outlook for the next six months both darkened. The institute's head, Hans-Werner Sinn, said that "the euro crisis is having an increasingly negative impact on the German economy."
Germany so far has been relatively unaffected by the debt troubles rocking the other countries in the 17-nation eurozone. However, with concern mounting about Spain's financial troubles and new questions over Greece's future in the eurozone, worries are growing that demand for German goods will be hit by declining economies across Europe and that Germany will have to inject more money into the eurozone to keep it afloat.
Germany has enjoyed two years of strong economic growth, helped by strong exports and increasingly robust domestic demand. It grew by 0.5 percent in the first quarter compared with the previous three-month period — a performance that kept the 17-nation eurozone as a whole out of recession.
However, the Finance Ministry said last week that the country's growth likely slowed in the second quarter, pointing to weaker industrial production figures and slipping business confidence.
Also in the survey, Ifo's measurement of business expectations over the next six months slid to its lowest level in three years. That "does not bode well for the outlooks of the eurozone's biggest economy," said Carsten Brzeski, an economist at ING in Brussels.
"With austerity-driven slowdowns coming now also to most other core eurozone countries, an obvious cooling of the Chinese economy and a still not very dynamic US recovery, order books are emptying and companies have started to reduce stocks," he added.
"The euro crisis immunity is clearly fading away," Brzeski said. "Today's Ifo gives an unappetizing foretaste of worse things to happen."
Underlining the potential impact of events elsewhere, the operator of Hamburg's harbor said Wednesday that, partly because of "the looming economic slowdown," it now expects container throughput this year to come in around the same level as 2011. HHLA said its previous forecast of roughly 5 percent growth no longer appears "achievable."
Ifo said the business climate among manufacturers declined markedly as they took a more pessimistic view of their current situation.
However, the think tank said that their export expectations declined only slightly; and it said the retail sector offered a hopeful sign, with the sector taking a rosier view of both its current and future situation.
The survey is based on monthly responses from some 7,000 companies.
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