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German business sentiment falls further in Nov.

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[November 24, 2008]  FRANKFURT, Germany (AP) -- German business confidence fell to a 15-year low in November as worries about the economy mounted amid the global economic crisis, a key report showed Monday.

The Ifo Institute survey showed all sectors are bracing for the worst, expecting exports to fall and unemployment to rise.

Insurance"The Ifo business climate for industry and trade in Germany declined strikingly in November," the institute reported Monday.

The survey, which gauges the sentiment of businesses in Europe's biggest economy, slid to 85.8 points in November from 90.2 points in October as investors continued to fear dim business prospects as a world recession takes its toll.

The last time it was that low was in February 1993.

Germany has tipped into recession along with several other European countries, and analysts had expected a reading of 88 points.

The survey of 7,000 companies found that firms were considerably less satisfied with their current business situation and again anticipated an even more unfavorable business development in the next six months.

"The business expectations of the surveyed firms have thus fallen continuously for the past six months. On the whole the economic downturn has worsened and will now have an impact on the labor market," the Ifo said in its report.

The Munich-based Ifo said that in manufacturing, business sentiment had cooled considerably. The firms have reported a clearly more unfavorable business situation in November and are again noticeably more skeptical regarding the six-month outlook.

It also said that Germany's exports are expected to weaken at an accelerated pace and that would, in turn, mean a call for job cuts.

Tullia Bucco, a UniCredit economist in Milan said this was the most worrying part of the survey results.

"It is a fact that the sharp slowdown in export orders, which the German economy relies strongly on, is severely hitting economic activity, prompting leading car companies to slash production in November in the face of a sharp downturn in demand," Bucco said in a research note.

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Currently, German unemployment is at 7.2 percent.

Sentiment also worsened in retailing and wholesaling, both for the current business situation and the six-month outlook.

Retailers, particularly, anticipate a much more negative business development over the coming months, while the construction industry's climate index fell only marginally.

"On the whole, the service companies no longer plan to hire additional staff. For this reason the services will provide almost no more positive stimulus to the labor market," said Hans-Werner Sinn, president of the Ifo Institute.

The situation index fell to 94.8 points in November from 99.9 points in October. The expectations index fell to 77.6 points from 81.4 points in October.

Ifo's survey was based on about 7,000 responses from companies in manufacturing, construction, wholesaling and retailing. The Ifo Business Survey in the services is based on about 2,000 monthly survey responses of firms.


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[Associated Press; By GEORGE FREY]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.



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