Reuters: US Dollar Report: UPDATE 1-German business morale plummets in May

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UPDATE 1-German business morale plummets in May May 24th 2012, 08:40 Thu May 24, 2012 4:40am EDT * Business sentiment drops on euro zone pessimism * Euro drops to 22-month low * BERLIN, May 24 (Reuters) - German business sentiment collapsed in May as fresh turmoil in the euro zone debt crisis unsettled firms in Europe's largest economy, threatening to end Germany's immunity to the troubles surrounding it. The Munich-based Ifo think tank said on Thursday its business climate index, based on a monthly survey of some 7,000 companies, fell to 106.9 in May from 109.9 in April. This was well short of even the most conservative forecasts. The news of the steepest drop since August last year sent the euro to a 22-month low. "German businesses have woken up to reality: islands of happiness might exist, economic islands within the euro zone hardly," said economist Carsten Brzeski at ING in Brussels. Germany sported surprisingly strong economic growth in the first quarter of the year - and throughout the euro crisis with the exception of a glitch in the last quarter of 2011, shrugging off recession fears. But sentiment indicators have pointed to clouds on the horizon for some time as the debt crisis escalates and a potential Greek exit from the currency bloc is now openly discussed. "The (drop) was a surprise even for us. It's down to the increased uncertainty in the euro zone," Ifo economist Klaus Wohlrabe told Reuters. "There are significant uncertainties due to the euro crisis." A sub-index on the current situation fell to 113.3 from 117.5 and firms told Ifo they were more pessimistic positive about their business outlook, with an expectations reading dropping to 100.9 from 102.7. The median forecast for the headline number in a Reuters poll of 41 economists had been for a drop to 109.4, with estimates ranging from 108.8 to 110.2. Link this Share this Digg this Email Reprints

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