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Business

German Business Confidence Falls; Economists Say Turnaround Near

Business confidence in Europe's largest economy has reached an all time low, but according to some economists, things could level out and even rebound in the coming months.

The bull statue in front of the stock exchange in Frankfurt

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Business confidence in Germany fell to its lowest point in 26 years this month, but there is a silver lining to this cloud as some economists are predicting that the end of the freefall could be in sight.

A survey released on Wednesday by the Munich-based Ifo economic research institute indicated that the business confidence index in Europe's largest economy slipped in March by 0.5 points to 82.1 points .

February's rating of 82.6 points was already the lowest business confidence has sunk since West Germany and East Germany were reunited in 1990.

Ifo surveyed 7,000 German companies in manufacturing, construction, wholesaling and retail to get their data.

"Firms have reported a further worsening of their current business situation," the institute said in a statement, adding that "an economic turning point has not yet been reached, in the opinion of the survey participants."

Economic optimism

Ifo president Hans-Werner Sinn

Ifo president Hans-Werner Sinn says an economic turning point has not yet been reached

While the March Ifo indicator gauging current business conditions slumped from 84.3 points in February to 82.7 points, the index's expectations component jumped for the third consecutive month from 80.9 to 81.6.

Many economists believe that the German economic slowdown could soon start to bottom out, opening up the chance of recovery after the implosion of America's Lehman Brothers in September helped to send the world economy into a sharp decline in the last months of 2008.

Morgan Stanley economist Elga Bartsch told news agency dpa that while the improved outlook is not strong enough to push the headline index higher, the continuing improvement in the survey's forward looking component is good news.

"Overall, however, these tentative signs of stabilization suggest to us that that after the sharp fall in activity over the winter, there is a good chance of a stabilization over the summer," she added.

Key surveys

In fact, the release of this new survey by Ifo comes on the heels of more positive readings from other economic surveys.

Belgium's business confidence survey, seen as a bellwether of the mood in the 16-member eurozone, unexpectedly rose to minus 28.6 points in March from minus 31.6 in February.

At the same time, the preliminary composite purchasing managers' index (PMI) for the eurozone, which draws together the manufacturing and services output indices, rose from 36.2 in February to 37.6 in March.

In addition, while concerns about current business conditions kept Tuesday's French business sentiment survey at record low levels in March, the Paris-based National Institute for Statistics and Economic Studies (INSEE) report showed executives in France cautiously optimistic about the months ahead.

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