German Business Confidence Declines Further In December

German business confidence dropped to its lowest level in more than of a quarter century in December as the credit crisis pushes Europe’s largest economy deeper into a recession. The Ifo institute business climate index, which is based on a survey of 7,000 executives, fell to 82.6 from 85.8 in November, giving the main index lowest reading since November 1982. The drop was largely a product of a significant fall in the current economic situation component - which fell to 88.8 from 94.9 in December. Expectations remained largely unchanged at a very low level.

The main sub components all remained very low in December,but what is most striking is the continuing deterioration in the manufacturing sector.




This picture is confirmed by the flash manufacturing PMI, which dropped to 33.5 in December, from 35.7 in November, falling further away from the 50 level, which marks the limit between contraction and expansion of the sector's activity. Thus the pace of contraction is increasing in manufacturing.




The services sector continued to fare a little better, with the rate of contraction even slowing, and the flash PMI reading increased to 46.4 in December from 45.1 in November.