Confidence at German companies worsened less than expected in August, the closely-watched Ifo survey showed on Thursday, but the institute's president said a recovery was still not on solid ground. Munich-based Ifo's business climate index, based on a poll of 7,000 companies, fell to 95.3, the third decline in four months, from 95.6 in July, the institute said. Economists had been expecting a bigger drop because of a recent surge in oil prices and doubts about the strength of the global recovery. The mid-range forecast of 33 economists polled by last Friday had predicted a fall to 95.1, with projections ranging from 94.0 to 96.0 .
"The survey results indicate that the economic recovery is still not on solid ground," Ifo President Hans-Werner Sinn said in a statement, adding that the business climate indicator declined in both eastern and western Germany. "The business climate in three areas -- manufacturing, wholesaling and retailing -- worsened. Only in construction was there a slight improvement," he said. An index gauging companies' assessment of their current conditions rose more than expected to 94.7 from 94.1, while a measure of their expectations declined more than expected to 96.0 from 97.1. Analysts said earlier this week that Germany's export-fuelled recovery is in danger of receding in coming months as domestic spending remains too weak to compensate for a likely slowdown in the global economy. Federal Statistics Office figures published on Tuesday confirmed GDP growth of 0.5 percent in the second quarter relied almost entirely on exports as private and public spending stagnated and capital investment declined.
BRAKES ON GROWTH
"Dissipating U.S. fiscal impulses, global central banks' tightening and the moderation of the Chinese expansion are likely to hamper global growth," said Thomas Hueck, an economist at HVB Group in Munich. Klaus Abberger, the new Ifo economist in charge of the monthly survey of 7,000 firms, told s on Thursday the dear oil had only affected some sectors. U.S. oil prices have surged by some 35 percent to more than $40 a barrel since the beginning of the year, but fell back on Wednesday after a government report revealed ample U.S. gasoline stocks. Analysts estimate that an oil-price rise of $10 sustained over a period of 12 months could shave as much as four tenths of a percentage point from Germany's annual growth rate. Prices have soared due to a combination of surging demand from China, a lack of spare capacity outside Saudi Arabia, and political tensions in the Middle East, which have undermined traders' confidence in the security of supplies. Belgium's leading indicator, which analysts see as a bellwether for the euro zone economy, dropped more than expected in August after higher oil prices took their toll and reversed a strong gain seen in July, data showed on Wednesday.///