German Business Sentiment Stable At 1-Year Low

Germany's business confidence remained stable in May after falling for five straight months, survey data from the Munich-based Ifo Institute showed Friday.

The business climate index came in at 102.2 in May, unchanged from April. This was the lowest reading since last May. The score was forecast to drop to 102 from April's originally estimated reading of 102.1.

Ifo President Clemens Fuest said the German economy is performing well in a difficult international situation. The current business survey and other indicators point to economic growth of 0.4 percent in the second quarter.

However, Joerg Kraemer, an analyst at Commerzbank, said the Ifo business climate and other leading indicators continue to point clearly downwards.

In addition, the interim strong appreciation of the euro generally has a longer dampening effect, especially as the higher oil price has added another negative factor, Kraemer noted.

Data released on May 24 showed that economic growth halved to 0.3 percent in the first quarter from 0.6 percent in the fourth quarter, on weak trade and government spending.

According to Ifo, the very good current business situation improved slightly, while the optimistic expectations logged a marginal fall.

The current conditions index rose to 106.0 from 105.8 a month ago. This was well above the expected level of 105.5. Meanwhile, the expectations index declined to 98.5 from 98.7 in the previous month.

In manufacturing, business confidence fell slightly as expectations weakened again, which was partially offset by the upward movement in current conditions.

In the services and retail, the business climate improved in May. At the same time, the business climate in construction reached a new record high.