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Ifo: German business sentiment falls to lowest since November 2012

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Ifo: German business sentiment falls to lowest since November 2012

German business sentiment slipped further in August to the lowest since November 2012 amid rising concerns that Europe's biggest economy might soon slip into a recession, according to a survey by the ifo Institute.

The seasonally adjusted ifo Business Climate Index fell to 94.3 from the revised 95.8 in July. The consensus forecast of economists polled by Econoday was for a reading of 95.2.

"There are ever more indications of a recession in Germany," said Clemens Fuest, president of the ifo Institute.

The current business situation index fell to 97.3 in August from 99.6 in the previous month, while the expectations index declined to 91.3 from 92.1.

The business climate indicator for manufacturing dropped to negative 6.1 from negative 4.3 in July. "The last time that industrial companies demonstrated such pessimism was in the crisis year of 2009," Fuest noted.

The index for the service sector declined to 13.0 from 18.0 in the previous month, while that for the trade sector worsened to negative 2.4 from July's positive reading of 1.4.

The data "underscores the near-term risks of industrial weakness triggering a recession in Europe's largest economy," wrote Oliver Rakau, chief German economist at Oxford Economics. Growing signs that weakness in the German manufacturing sector is spilling over to other parts of the economy add to the economic case for some further fiscal easing, he added.

"To gauge the likelihood and the size of any German stimulus, the domestic economy will be the indicator to watch," said Carsten Brzeski, chief economist for Germany at ING, in a separate note.