German business and consumer confidence fell more than economists forecast, heightening concern that Europe's largest economy may be slipping into a recession.
The Munich-based Ifo institute's business climate index, based on a survey of 7,000 executives, dropped to a three-year low of 94.8 from 97.5 last month. Consumer sentiment slumped to the lowest level in five years, according to Nuremberg-based market research company GfK AG.
The euro fell. Germany's economy contracted in the second quarter and may fail to grow in the third. While oil prices have receded from a record US$147.27 a barrel, they're still up 60 percent over the past year, crimping companies' spending power just as the euro's rise and the United States housing slump hit exports, Bloomberg News said.
"The deterioration of the outlook in Germany is showing no sign of stabilization," Maxime Alimi, an economist at Lehman Brothers International in London, said in a research note.
Ifo's gauge of business expectations dropped to 87, the lowest since February 1993, when Germany was experiencing the worst recession of the past two decades. A measure of current conditions eased to 103.2 from 105.7.
The economy contracted 0.5 percent in the three months through June as construction slumped and companies and households reduced spending, the Federal Statistics Office confirmed yesterday. Exports also fell.
The euro dropped more than a cent after the Ifo report to US$1.4597.
"A German downturn would not bode well for the euro zone as a whole, to put it mildly," said Holger Schmieding, chief European economist at Bank of America Corp in London.
