With entrepreneurs facing increasing geopolitical uncertainty, Germany's closely watched monthly business confidence index has dropped at the start of the year. Optimism about the future has declined.
German business confidence fell in January, the latest monthly poll among executives by the Munich-based Ifo economic research institute showed Wednesday.
The overall January index stood at 109.8 points, marking a 1.2-point drop month on month and reaching the lowest level since September 2016.
The monthly decline came as a surprise to most analysts, with a Factset survey predicting a lesser impact of recent global developments on how German board managers felt about their current situation and future business prospects.
Protectionism a headache
Firms in all the four sectors that Ifo surveyed - manufacturing, construction, wholesaling and retail - reported lower confidence.
"Germany is getting increasingly concerned about the possible impact from US President Donald Trump's suggested trade sanctions, such as punitive tariffs," ING Diba economist Carsten Brzeski said in a statement.
The US dislodged France as Germany's biggest export customer for the first time in many years in 2016, highlighting the importance of smooth trade relations between the two nations.
Combined with the threat to German exports from Brexit, "the German economy will continue to be highly dependent on domestic demand," Brzeski added.
hg/jd (AFP, dpa)