FRANKFURT (AFX) - The fall in Germany's Ifo business confidence index to its lowest level since July 1999 was widely expected and does not boost the fast diminishing chances of the European Central Bank cutting interest rates this week, economists said.
They said today's keenly watched figures showed sharp declines in the business conditions and business expectations indices which provide further, if predictable, evidence of the ongoing slowdown in the German economy.
The headline Ifo business climate figure fell to 93.9 from 94.9, while the business conditions number tumbled to 90.7 from 91.4 and the expectations to 97.1 from 98.5.
"The decline in the Ifo index was in line with expectations," said Holger Fahrinkrug at UBS Warburg.
He said the information contained in today's figures has been already noted by the ECB, which meets on Thursday to decide whether to cut rates.
"We doubt this increases the chances of an ECB easing this week ... Industrial and export slowdown in reaction to the U.S. is probably accounted for by the ECB," he said.
Economists added there is little chance of the Ifo index recovering in the coming months, as the effects of the U.S. economic slump take their toll on business confidence in Germany.
Economists at Morgan Stanley said today's data also means German first quarter GDP will show a further slowing after its dramatic slowdown in the final stages of last year.
"Going forward we expect business sentiment to move towards and possibly fall below its long-term average of 93.0," they said in a note to clients.
Emmannuel Ferry, economist at Exane said only at the end of the year is there a chance of a recovery in the Ifo figures.
"The low point should be reached in the third quarter of this year ... the outlook depends on the U.S., which only indicates a prospect of a cyclical rebound at the end of the year."