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Wednesday, 21 March, 2001, 12:25 GMT
German business confidence sinks
German car factory
German business confidence hits a 19-month low
Business confidence in Germany has sunk to its lowest level since July 1999, signalling a deterioration in the growth outlook for Europe's biggest economy.

The closely watched Ifo business climate index for west Germany tumbled further than expected in February, falling to 94.9 compared to 97.5 in January.


The data clearly suggests that there is potential for a sharp slowdown in Germany

Rainer Guntermann
Dresdner Kleinwort Wasserstein
"The data clearly suggests that there is potential for a sharp slowdown in Germany around the corner," said Rainer Guntermann, an economist at Dresdner Kleinwort Wasserstein.

Other analysts said the fall will raise the chances of an interest-rate cut by the European Central Bank (ECB).

The German economy is the biggest in the 12-nation eurozone, making up one-third of the total eurozone output. Inevitably, the health of its economy is a significant indicator for the whole euro area.

January blip

The west German index fell to its lowest level since July 1999, when it stood at 93.7.

"It's very poor. It raises the chance of seeing a 50 basis point interest-rate cut from the ECB rather than 25 (basis points) when they eventually start moving," said Merrill Lynch's Peter Saacke.

Germany is Europe's economic powerhouse
Germany is Europe's economic powerhouse
In January, strong data for Germany's retail business led to a surprise bounce, but analysts saw the jump as a one-off blip.

The main index for east Germany was marginally down to 106.5 from 106.6.

The Ifo index is based on a survey of 7,000 companies and its data often points to trends that might develop later throughout the economy.

The Frankfurt stock market was in negative territory on Wednesday, with the Dax index losing 95.59 points to 5686.57 at 1134 GMT.

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