German business confidence weakens

German business confidence weakened for the second month in a row in September, according to new figures.

The ifo Business Climate Index fell from 115.9 points to 115.2 points in September, with companies less satisfied both about their current situation and the short-term outlook.

Marked decline

Manufacturing and wholesaling showed a marked decline on August’s figures, with manufacturing confidence falling from 29.9 to 27.9 and wholesaling from 23.7 to 19.3.

Only the construction and retailing sectors showed increased confidence.

Chancellor Merkel suffered a big setback in the German elections Photo: Shutterstock

The survey, based on monthly interviews with approximately 7,000 German businesses, came the day after German election results, which saw a big fall in support for Chancellor Angela Merkel’s conservative CDU/CSU alliance.

The election also saw big gains for the anti-immigration far-right AfD party – which won 12.6% of the vote.

“While the September drop was probably a result of increased geopolitical tensions, ongoing problems in the German automotive industry and the stronger euro, the next months will tell how the German business sector looks at the results of Sunday’s poll,” said Carsten Brzeski, ING’s chief economist for Germany & Austria.

Political earthquake

“In our view, last night’s election result is a combination of political earthquake and stabilisation. Angela Merkel will remain chancellor, but she will very probably be a weaker chancellor in a less stable government than over the last 12 years.

“The rise of the AfD could increase pressure in her own party (and the Bavarian sister party) to move further to the political right, while a coalition together with the FDP and the Greens is anything but a done deal and politically challenging.

“Currently, it even looks ambitious to see a new German government before Christmas.”