2018.06.2508:49:00UTC+00German Ifo Business Morale Weakens In June

Germany's business confidence weakened, as expected, in June as trade wars weighed on current assessment of companies, survey data from the Munich-based Ifo Institute showed Monday.

The business climate index dropped to 101.8 in June from revised 102.3 in May. A similar score was last seen in May 2017. The reading also matched economists' expectations.

Companies were less satisfied with their current business situation. By contrast, their business expectations remained slightly optimistic.

The current situation indicator slid to a 1-year low of 105.1 in June from revised 106.1 in May. The score was forecast to ease moderately to 105.6.

Meanwhile, the expectations index held steady at 98.6 in June. The expected score was 98.0.

The tailwind enjoyed by the German economy is calming down, Ifo President Clemens Fuest said.

The mounting risk of a trade war suggests that this cloudier business sentiment signals not only a short dip in growth, but an intermediate downswing that should last until the end of this year, Joerg Kraemer, chief economist at Commerzbank, said.

However, Capital Economics' economist Jennifer McKeown said Germany's growth is still pretty strong. The economy is set to receive some support from a small fiscal boost in the coming months, with households benefiting in particular from higher social spending.

The Ifo survey showed that business climate in manufacturing weakened due to poorer assessments of the current business situation.

In the service sector, business climate deteriorated reflecting slight fall in current business confidence. Service providers also scaled back their expectations for the months ahead.

Companies in retailing downwardly revised their assessments of the current business situation and their outlook turned slightly pessimistic for the first time since February 2015.

In construction, business climate edged down in June as contractors were less satisfied with their current business situation, while business expectations remained slightly optimistic.