German business sentiment worsened in April to its lowest level since January 2006, depressed by the high oil price, strong euro and financial market turmoil, a closely watched survey showed this morning.
The Munich-based Ifo economic research institute said its business climate index, based on a monthly poll of around 7,000 firms, fell to 102.4 from 104.8 in March.
The reading was weaker than all forecasts in a Reuters poll of 52 economists, which gave a mid-range forecast of 104.3. The euro fell to a one-week low versus the dollar and bunds rose after the release of the data.
Ifo economist Klaus Abberger said companies now expected the global financial crisis to have an effect on the real economy.
"Negative forces from the high oil price, the euro and the financial crisis are starting to have an effect," he said.
In evidence that the euro's rise is hurting some German companies, chipmaker Infineon said yesterday it would miss its profitability target for 2008/09 if the dollar did not recover from recent lows versus the European currency.
A separate Ifo gauge of current conditions fell to 108.4 in April from 111.5 the previous month. A reading of 111.0 had been forecast.
The survey's expectations component dropped to 96.8 from 98.4 in March and compared with a median forecast of 98.0. The expectations reading was the weakest since August 2005.