2017.09.2508:23:00UTC+00German Ifo Business Confidence Drops For Second Month

German business sentiment dropped for the second straight month in September as companies were less satisfied with their current business situation and their short-term outlook, survey data from the Ifo Institute showed Monday.

The business confidence index fell to 115.2 in September, while it was expected to remain unchanged at 115.9 seen in August.

Confidence in manufacturing and wholesaling declined in September, while sentiment among retailers and contractors improved from August.

Germany's economy nevertheless goes into the new legislative period with a strong tailwind, Ifo President Clemens Fuest said.

While the September drop was probably a result of increased geopolitical tensions, ongoing problems in the German automotive industry and the stronger euro, the next months will tell how the German business sector looks at the results of Sunday's poll, Carsten Brzeski, an ING economist, said.

Stephen Brown, an economist at Capital Economics, said that a more likely cause of the decline is the recent strength of the euro, rather than political uncertainty.

While Germany now looks set for lengthy coalition negotiations, the likelihood of the business-friendly FDP joining government will buoy some businesses, the economist noted. That said, it is unlikely that growth will be quite as strong as the Ifo suggests either, Brown added.

Data showed that the current situation index fell to 123.6 in September from 124.7 in August. This was below the expected reading of 124.6 and the weakest in four months.

At the same time, the expectations index slid to 107.4 from 107.8 in the previous month. The expected reading was 107.7.