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German business confidence nosedives

(Agencies)
Updated: 2008-12-19 08:01

German business confidence dropped to the lowest in more than a quarter century in December as the credit crisis pushes Europe's largest economy deeper into a recession.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, fell to 82.6 from 85.8 in the previous month. That's the lowest reading for Ifo's main index since November 1982. Economists expected a drop to 84, the median of 39 forecasts in a Bloomberg News survey shows.

Germany's economy is on course for its worst contraction since 1993 next year as a global slowdown saps export demand, forcing companies to curb spending and hiring. Daimler AG, the world's biggest maker of heavy trucks, said the recession may be "deep" and the European Central Bank this month cut its key interest rate by the most on record to stem the slump.

"The indicator points to a heavy recession," said Heinrich Bayer, an economist at Deutsche Postbank AG in Frankfurt, who correctly forecast the Ifo outcome. "We need stimulating effects through further rate cuts and fiscal impulses as soon as possible, ideally internationally."