German business confidence fell for a second month in April after oil prices rose to the highest in 2 1/2 years, damping the global economic outlook and threatening to curb domestic consumer spending.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 110.4 from 111.1 in March. Economists expected a decline to 110.5, according to the median of 38 forecasts in a Bloomberg News survey. The index rose to 111.3 in February, the highest since records for a reunified Germany began in 1991.
Crude oil climbed above $112 U.S. a barrel this month, the most since September 2008, on political unrest in North Africa and the Middle East. While market researcher GfK AG says rising prices are eroding German consumer confidence, the Bundesbank estimates economic growth accelerated in the first quarter as companies increased spending and hiring to meet export orders from emerging nations such as China.
Ifo’s gauge of the current situation rose to 116.3 from 115.8, while an index measuring executives’ expectations fell to 104.7 from 106.5. The euro, which has climbed 9% against the dollar this year, eased to $1.4615 U.S. after Ifo’s report from $1.4641 U.S. beforehand.
The German government predicts growth of 2.6% this year after a record 3.6% in 2010. Rising oil prices may put a brake on the global recovery and fan inflation as companies pass on higher input costs. Higher energy costs pushed German inflation to 2.3% last month.
