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German business figures drop again

German economy is strugglingThe disappointing German IFO report (see 9.20am) suggests the eurozone crisis has got its teeth firmly into Europe's largest economy, with the global economy also providing little relief. It follows yesterday's PMI data, which showed Germany's private sector is currently contracting. Reuters has rounded up some early analyst reaction and has polished a report on the subject. The mood within companies has slipped noticeably; the euphoria from the beginning of the year has gone. It is mostly due to developments in Europe: the political stalemate in Italy, then the bungled Cyprus rescue and then news that parts of the Portuguese savings package were unconstitutional. In good times, the global economy would have helped but in the second quarter - there has been no good news from emerging markets: Chinese growth has slowed, battle cries are coming from North Korea and early indicators from the United States have been weak recently. No wonder that companies have lost their hopes for a dynamic recovery. The decline is surprisingly clear. Together with the PMI, it shows that the prospects for the German economy have worsened. There is a risk that growth will be slower than expected so far. Many problems in the euro zone remain unresolved; reforms still need to be done. And global weaker growth impulses add to those woes. The sharp dip in Germanys IFO index marks another nail in the coffin for stronger recovery this year. Germanys economic fortunes are seeing a dramatic reversal of fortunes. The earlier bravado that Germany could stave off the euro zone debt crisis is taking a tumble. "Business confidence is taking a much gloomier view of the outlook ahead, based on the hard landing in the euro zone and growing signs of slowdown in the global recovery. Based on what we have recently seen from the latest IFO, ZEW and PMI business surveys, Germany will be very lucky to avoid a nearterm recession in the recent two quarters. "The economy is still flirting with recession this year. With so much of Germanys economy dependent on the success of its export machine, the downturn in global prospects is bound to be reflected in a weaker outlook ahead. The euro zone debt crisis is the main millstone around the German economys neck. The export-driven German economy is suffering from a sagging global economy. Because at the moment even the Asian economies, especially China, are driving with the hand-brake on, important impulses from the Far East are also lacking. Instead of raising hopes for a pickup in 2014, economists should realise that the economic environment will remain difficult for now. The simple message is: the

2 German economy need not fear a significant setback but there is no global support for a faster pace of expansion.

German consumer sentiment drops again

German business confidence has fallen this month, according to the monthly IFO report published in the last few minutes. The business climate index dropped to 104.4 for April, down from 106.7 in March, showing Germany's firms are experiencing a tougher time. It's the second monthly fall in a row -- and will fuel fears that. The forward-looking business expectations measure also fell, to 101.6 from 103.6 in March. This has knocked the euro back below the $1.30 mark, on predictions that the European Central Bank could cut interest rates in the future.

Throughout Europe
The eurozone jobless rate rose to 12.1% in May, up from 12.0% in April, according to EU statistics office Eurostat. The youth unemployment rate was almost double that, at 23.8%, as 3.5 million under-25s were unemployed in May. In Spain and Greece the youth unemployment rate was as high as one in two. The rise in unemployment was driven by increased joblessness in countries at the heart of the crisis, including Spain, Italy and Ireland. As the eurozone languishes in its longest-ever recession, the number of people out of work across the currency bloc rose by 67,000 in May to 19.2 million. Seventeen members of the eurozone have higher unemployment rates than a year ago, and 10 have lower rates. Economists had forecast an even higher unemployment rate of 12.3% for May in a Reuters poll. They warned the unemployment crisis could well get worse before it gets better."An end to the eurozone labour market downturn is not yet imminent. Indeed, the employment expectations indices from the European commission's business survey are still at levels consistent with further increases in unemployment. However, with the recession across the eurozone petering out, the peak in unemployment should not be too far away either," said Martin van Vliet at ING Financial Markets. There was very limited cause for optimism in Eurostat's slight downward revisions to its earlier data it had previously estimated the eurozone jobless rate at 12.2%.Once again, the lowest unemployment rates were recorded in Austria (4.7%), Germany (5.3%) and Luxembourg (5.7%), and the highest in Spain (26.9%) and Greece (26.8% in March 2013, the most recently available data). Date : july 02. 2013-07-01

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