Azernews.Az

By Bloomberg

German business confidence fell for the first time in seven months in May, signaling some concern over the growth outlook for Europe’s largest economy.

The Ifo institute’s business climate index dropped to 108.5 from 108.6 in April. The median estimate was for a decline to to 108.3, according to a Bloomberg survey of 35 economists.

The Bundesbank has predicted that Germany’s economic expansion will continue in the coming months, and a report on Friday showed German capital investment increasing at the fastest pace in a year. At the same time, risks remain, notably from uncertainty over Greece’s place in the euro-area.

“The weakness in global trade in early 2015, persistent geopolitical uncertainty, together with heightened volatility on European financial markets, explain the decline in German business sentiment in May,” said Anna Maria Grimaldi, an economist at Intesa Sanpaolo SpA in Milan. “The underlying momentum for the German economy remains solid.”

One concern is Greece, where the government could run out of cash and precipitate a regional crisis that could hurt German businesses. Negotiations in Riga between the Greek, French and German government leaders ended early Friday morning without any sign of a breakthrough that will unlock bailout funds.

Capital Spending

Germany’s economy is still set to outperform that of the euro area. Unemployment stands at a record-low 6.4 percent, companies stand to benefit from low borrowing costs, and exporters should gain from a weak euro as the European Central Bank’s asset-purchase program continues.

ThyssenKrupp AG, the nation’s largest steelmaker, raised its earnings forecast after reporting second-quarter profit that beat analysts’ estimates. Hanover, Germany-based Continental AG, Europe’s second-biggest maker of car parts and tires, has boosted its 2015 sales forecast three times this year.

Capital spending in Germany increased 1.5 percent last quarter, data from the Federal Statistics Office in Wiesbaden showed on Friday. Private consumption advanced 0.6 percent and government spending climbed 0.7 percent, while net trade was a drag on growth. Gross domestic product expanded 0.3 percent, compared with 0.7 percent in the previous quarter.

The European Commission predicts German GDP will rise 1.9 percent in 2015 and 2 percent in 2016, compared with 1.5 percent and 1.9 percent in the 19-nation currency bloc.