Brexit, terror weakens business sentiment in Germany, France

EPA/TIMM SCHAMBERGER

A candle burns ahead of an ecumenical service for the victims of the bomb attack in Ansbach in the St. Gumbertus church in Ansbach, Germany, 28 July 2016.

Brexit, terror weakens business sentiment in Germany, France


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Business sentiment in Germany and France has been hard hit by the Brexit vote and a series of terrorist attacks. The Munich-based Ifo economic institute’s business climate index fell to 106.2 in August from 108.3 in July, despite expectations for a slight increase.

The Wall Street Journal quoted Klaus Wohlrabe, an economist at the Ifo institute, as saying that Brexit has affected the Ifo index “with a slight delay”.

“Last month, it was the automotive sector that led the overall index lower. This month the mood deteriorated in particular among companies in the electrical and chemical sectors,” he said. “All those sectors have close ties with the UK.”

The UK is Germany’s third-largest export market after the US and France, according to Germany’s statistics office. It is also second biggest target for German foreign direct investment after the US, according to UniCredit.

According to Tullia Bucco, an economist at UniCredit in Milan, the decline was most likely the result of “protracted strikes in the airline industry and a new string of terror attacks”.

In a separate report, the BBC noted that the Ifo index showed confidence had fallen in all but construction and services.

“The German economy has fallen into a summer slump,” Ifo president Clemens Fuest said.

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