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Trade tensions damp German business sentiment in March

The threats of trade wars and protectionism damped German business confidence in March, although it remained at a high level, the ifo Institute Center for Economic Studies said in its latest monthly survey.

The seasonally adjusted business climate index fell to 114.7 points, down 7 percentage points from the February reading. Businesses were slightly less satisfied with their current situation. The current situation indicator dropped to 125.9 from 126.4. Optimism for improved business conditions also declined in March, with the expectations index sliding to 104.4 from 105.4 in February.

The business climate index for the manufacturing industry declined to 26.5 from 28.1, although manufacturing demand remained robust. Companies expressed plans to ramp up production but on a smaller scale compared to previous months.

The business climate index for the construction industry increased by 2 points to 17.9 on markedly more optimistic business expectations, ifo said.

While wholesalers' views of their current situation improved, they had less optimistic expectations for the next six months, so their overall business climate index remained unchanged from last month's level. For retailers, there was a significant deterioration in the business climate. Their business climate index sank to 4.7, its lowest level since February 2017.