FRANKFURT (MktNews) - The Frankfurter Allgemeine Zeitung's German economic indicator slumped in January and stood below the year-earlier level for the first time in two years, the newspaper reported Tuesday.
The FAZ indicator fell 0.5% in January to a level of 120.4.
While business sentiment in recent months seemed to be worse than the actual economic situation, the real economic situation has now deteriorated, the newspaper said.
For example, the sharp drop in foreign demand for German manufactured products hints on the possibility that the strong growth of exports is coming to an end, the FAZ said.
In addition, the euro's exchange rate has increased significantly in real terms. Sentiment in the manufacturing sector deteriorated, as did job offers in the FAZ.
The index gives the impression that the economy will not benefit significantly from the income tax cuts that took effect at the beginning of the year, the newspaper concluded. The German government and the European Central Bank are counting on higher consumer spending, spurred by tax cuts and continued gain in employment, to offset the expected decline in net exports this year.
The indicator is meant to signal German industrial production six month ahead and should help identify turning points in the business cycle.