German business confidence falls in December

MarketsAssociated Press

A closely watched survey shows German business confidence is down in December, from a record high a month earlier.

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The Munich-based Ifo Institute said Tuesday its business climate indicator fell to 117.2 points from 117.6 points in November.

The ebb in optimism was due to waning euphoria, with company managers sensing that the strong growth seen in recent months can't continue forever, said Clemens Fuest, president of the Ifo Institute.

Liechtenstein's VP Bank noted that the index had reached "dizzying heights" and a decline in sentiment might be viewed as "healthy."

Companies assessed their own current situation as better, at 125.4 points in December compared with 124.5 points the previous month. Expectations for the next six months fell to 109.5 points from 111 points in November.

Carsten Brzeski, chief economist for Germany and Austria at ING Diba, said the forecast may have been dampened by concerns about the ongoing political impasse in Berlin. Three months after national elections Chancellor Angela Merkel hasn't been able to forge a new coalition with any potential partners yet.

"The sharpest drop in the expectation component since January 2017 suggests that German businesses do seem to care about politics," said Brzeski.

Analysts said many German companies will also be closely watching the passage of U.S. President Donald Trump's tax reform plans, which could affect foreign imports.

The Ifo index is based on about 7,000 survey responses from firms in manufacturing, construction, wholesaling and retailing.