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German firms increasingly pessimistic about export economy

WOLFSBURG, GERMANY - MARCH 01: A technician uses an app to control a Tünkers FTF robotic platform that is transporting stamped car parts at the Volkswagen factory on March 01, 2019 in Wolfsburg, Germany. Volkswagen is scheduled to hold its annual press conference to announce financial results for last year on March 12.(Photo by Sean Gallup/Getty Images)
A technician at the Volkswagen factory on March 01, 2019 in Wolfsburg, Germany. Credit: Sean Gallup/Getty Images

German companies were feeling decidedly down about the state of the export economy in June, according to the latest monthly survey from the Munich IfO Institute.

The business sentiment index of 2,300 companies found export expectations for the industry fell to 0.0 balance points in June, from 0.9 points in May.

“The companies expect no more growth in exports,” said Ifo President Clemens Fuest. “Good news has become rare in the global trade dispute.”

Faced with the ongoing US-China trade war, Brexit uncertainty and a slowdown in global car sales, it is unsurprising that the Ifo survey found carmakers to be particularly skeptical about exports, and reckoning with an overall decline. However, the Ifo found that pharmaceutical and food-and-beverage firms have a more positive outlook.

READ MORE: Trump tariffs and China woes trigger worst crisis for global car industry in 20 years

The gloomy view on foreign exports in the industry reflects the general slowdown in the German economy. The Ifo business climate index for June dropped for the third month in a row in June to its 97.4, it lowest level since November 2014.

"The German economy is heading for the doldrums," Ifo President Clemens Fuest said on Monday. It still forecasts that the German economy would grow by 0.6% this year but lowered its projection to 1.7% from 1.8% for 2020.

“The German economy currently is the best showcase model for a broader phenomenon: the stark discrepancy between external risks and uncertainty and solid domestic fundamentals,” said Carsten Brzeski, chief economist an ING Germany.

“In our view, a bottoming out is in sight for German industry. As long as trade conflicts stay within the boundaries of stock market volatility and a possible weakening of the US economy, tensions could initially increase but without leading to an extreme escalation.

However, Brzeski said, a bottoming out is “far from being a strong rebound.”

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