No End in Sight to German Gloom
IFO calculates a widely-watched industrial confidence index, its business climate index, and that fell to the lowest level for nearly five years in June, data published on Monday showed.
The distinctly cooler business climate in Germany left the euro shivering on the foreign exchange markets where the single currency slipped below $0.87.
IFO's business climate index for Western Germany fell to 89.5 in June from 90.8 in May, IFO said in a statement.
"That's the lowest level since August 1996 when we also had a reading of 89.5 points," IFO's chief economist Gernot Nerb said in a telephone interview with AFP.
"The weakness is being seen primarily in industry and there's no turnaround in sight. The index is now lower than it was at around the time of the Asian crisis."
Nevertheless, there could be no talk of recession, just yet, Nerb added.
"We're still a long way off the levels (of around 80) that we saw in 1993. We can't talk about recession yet," Nerb noted.
The IFO index measures companies' assessment of their current business, as well as their expectations for the next six months.
The IFO index, which is measured against a basis of 100 for 1991, is based on a survey of more than 7,000 companies and is widely watched by economists because it is seen as an indicator of companies' investment plans and the repercussions those plans will have on economic growth.
And given the size and weight of the German economy, the biggest in the 12-nation euro zone, the index is also a significant indicator of the health of the economy in the entire euro-zone.
Nerb declined to say whether IFO's latest findings would cause the institute to downgrade its German growth forecast for the current year.
IFO previously predicted the German economy would expand by 1.2 percent in 2001.
"We're scheduled to publish our new forecast on Thursday. I can't say anything until then," Nerb said.