German business morale 'dips for fourth month in a row'

Image caption Germany is seen as the engine room of the eurozone

German business confidence has hit a 16-month low, amid fears the country may fall into recession.

The Ifo Institute's business climate index, dropped to 106.4 in October, the lowest since June 2010, from 107.4 in September.

It comes after Germany cut its 2012 growth forecast from 1.8%, to 1% on Thursday.

Investor confidence fell to a three-year low last week and the Dax share index has dropped 19% since August.

Four months of falls

It is the fourth consecutive month in which German business confidence has fallen.

The German government expects growth of 2.9% this year, but the continuing eurozone crisis is expected to hit the country's exports-driven economy.

"Confidence and activity received a blow from the escalating sovereign debt crisis, which has spread to the banking industry and the real economy," said Aline Schuiling, senior economist at ABN AMRO Bank.

"Nevertheless, we do not expect the German economy to enter a recession, as final domestic demand should be rather resilient and act as a buffer against declining exports."

The German Ifo business index is based on a survey of about 7,000 businesses which asks them to rate the level of current business conditions and expectations for the next six months.

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