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German business climate hits near-two-year low

A key barometer of German business sentiment has dropped to levels not seen in almost two years. The latest Ifo benchmark index suggested Europe's biggest economy may be in for a bumpy ride in the months to come.

Presenting its closely watched index of the mood among German executives, the Munich-based Ifo economic research institute reported Monday its benchmark barometer fell for the sixth consecutive month in October.

The index dropped to 103.2 points from 104.7 points in the previous months, suggesting Germany's economy may face severe headwinds in the fourth quarter of 2014.

The poll among 7,000 managers revealed a generally worse assessment of their current business environment. At the same time, the respondents were increasingly pessimistic about economic developments in the next six months.

Dim outlook

"Economic prospects have worsened even further," Ifo President Hans-Werner Sinn said in a statement, citing ongoing geopolitical tensions over the Ukraine conflict and the situation in the Middle East.

The latest Ifo index saw European shares largely erase early morning gains that had appeared as a direct response to the better-than-expected results of the ECB's banking sector health check, with only 25 out of 130 big lenders failing the test.

Also on Monday, the Association of German Chambers of Commerce and Industry (DIHK) predicted the national economy would only expand by 1.3 percent this year. Germany would log only 0.8 percent growth in 2015, DIHK added, thus failing to be Europe's growth engine in the foreseeable future.

hg/cjc (dpa, AFP)

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