German CEOs pessimistic

September 21, 2001 Posted: 1340 GMT

LONDON (CNN) -- German business leaders are becoming increasingly pessimistic over the economic outlook for Europe's largest economy, a report shows.

Germany's Ifo index, Europe's most closely-watched indicator of business sentiment, fell to 89.5 points in August, just a tenth of a point off of a five-year low hit in June, showing executives were more pessimistic than in the previous month.

It is the sixth time the Ifo index has shown a drop in business confidence in seven months. Economists had expected the figure to stay flat.

Economist Gernot Nerb, who manages the Ifo survey of 7,000 companies, said last week's terrorist attacks in the U.S. had only had a marginal influence on the results.

He told Reuters: "We had three quarters of the answers before the attacks and one quarter afterwards... but there is hardly any difference between the two sub-samples."

But many analysts voiced skepticism over the results for August, saying September's results would show a fall by fully reflecting fears of a global recession sparked by the attacks on the World Trade Center and the Pentagon.

"August is probably a void month because the index reflects a different world. I expect that the business expectations index will be significantly lower next month," Andrew Snowball at Julius Baer investments, told Reuters.

The increase in pessimism in Germany casts a deeper shadow over the outlook for growth in the 12-nation euro zone.

Around 14 percent of the bloc's exports go to the U.S. and markets have been sent tumbling in the aftermath of the U.S. disaster.

The survey showed the western German business conditions component of the index dropped to 83.3 points from a revised 84.7 points in July and the broad climate index for eastern Germany was 101.4, down from 102.1 a month earlier.

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