Ifo: Crimea crisis hits German business confidence

The German Ifo business confidence index fell for the first time for five months in March, data showed on Tuesday, as the Crimea crisis hurts sentiment in Europe's biggest economy. The Ifo economic institute's closely watched business climate index fell to 110.7 points this month from 111.3 points in February. "The crisis of the emerging economies and the events in Crimea are impacting the confidence of German firms," Ifo chief Hans-Werner Sinn said in a statement. "Companies expressed far less confidence in future business developments, but were more satisfied with their current business situation," he said. Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months. The sub-index measuring current business rose to 115.2 points in March, its highest level in nearly two years, from 114.4 points in February. By contrast, the outlook sub-index fell to 106.4 points from 108.3 points. Last week, the ZEW barometer of investor sentiment fell to its lowest level in seven months, also amid uncertainty about the economic fallout from the crisis in Crimea. But analysts said the uncertainty will not derail Germany's economic recovery just yet. "While business expectations have continued their slide, owing no doubt to concern about the Crimean crisis and the emerging Asian economies, companies still view their current business situation as somewhat improved. All in all, solid growth of 2.0 percent seems likely this year," said Commerzbank economist Joerg Kraemer. - No reason to sound alarm - UniCredit economist Andreas Rees said that "the latest events are some kind of a stress test for our upbeat growth forecast" of more than 2.5 percent this year. "Yes, in the meantime, the forecast risks have shifted to the downside. But no, there is no reason to ring the alarm bell or even to call off the upswing," Rees said. "As long as the Crimean crisis does not escalate ... the hit to forward-looking confidence will only be a temporary one. Furthermore, please keep in mind that German export shares to Russia and Ukraine are small," the expert said. For Natixis economist Johannes Gareis, the Ifo data "add to the mixed mood painted by other sentiment indicators such as the ZEW survey last week." However, "all in all, the Ifo reading does not change the game for German businesses and is not unduly disappointing in the light of the heightened geopolitical risks in Ukraine," Gareis said. Capital Economics economist Jonathan Loynes similarly believed that while "sentiment towards the economy might be starting to soften a little bit, the current conditions index still points to solid growth." ING DiBa economist Carsten Brzeski was confident that the German economy "is gaining momentum. The exceptionally mild weather has given an enormous boost to construction activity." Overall, "today's Ifo index sends two messages: the German economy has again entered the fast lane in the first quarter but continuing the ride at maximum speed will not be an easy task," the economist said.