German business sentiment has fallen for a fifth straight month to its lowest level in nearly 1-1/2 years. As Ciara Lee reports it dampening expectations for a third-quarter rebound in Europe's largest economy
German business sentiment - lacking its mojo for a fifth straight month. It dropped to its lowest level in nearly 1-1/2 years in September, dampening expectations for a third-quarter rebound. The index of 7,000 firms fell further than expected with all sectors suffering. The news followed a second quarter contraction in the economy of 0.2%. And it was a stark contrast to the start of the year when Germany was steaming ahead thanks to a mild winter boosting construction. Some are now even warning of possible recession although Germany's IFO doesn't agree. (SOUNDBITE) (German) IFO ECONOMIC CLIMATE EXPERT, KLAUS WOHLRABE, SAYING: "We wouldn't use the word recession. We had a very weak second quarter, and the current numbers mean we're likely to have a very weak third quarter. But the economy as a whole will, even so, see a positive growth rate this year - because we saw such a strong first quarter." The crisis in Ukraine and a faltering European recovery are behind the weakness. More than 6,000 German firms are active in Russia. Julien Seetharamdoo is from HSBC Global Asset Management (SOUNDBITE) (English) JULIEN SEETHARAMDOO IS FROM HSBC GLOBAL ASSET MANAGEMENT, SAYING: "Some of the German data though may also prompt the government to embrace some sort of fiscal stimulus which will be better for the euro zone as a whole and is something that Mario Draghi has been calling for. So it's not necessarily all bad news but it does highlight the change in dynamics and the fact that Germany's suffering a bit from improved competitiveness from Japan in particular." There was better news for Italy which IS in recession. Italian consumer confidence rose for the first time in four months. But with unemployment there rising most are still forecasting a decline in Italian output this year. The ECB's new promise to keep monetary policy loose in a bid to boost low inflation and help the euro zone will be welcomed by many.