German business climate getting chillierAugust 27, 2012: 11:48 AM ET
As the eurozone economy continues to falter, German business owners are growing increasingly pessimistic about the future.
The Munich-based Ifo Institute said Monday that its Business Climate Index fell in August for a fourth consecutive month.
The gloomy mood among German firms comes as economic activity across the 17-nation euro area has slowed. In the second quarter, eurozone gross domestic product declined 0.2% from the prior quarter, according to initial estimates.
While the German economy grew in the second quarter, analysts say the weakness in the eurozone will take a toll on Germany's exporters.
Germany is the largest economy in the eurozone and exports are its main driver. But demand for German goods has faded as the long-running debt crisis weighs on economic activity across the region.
For the first time in nearly three years, German firms have a "slightly negative" outlook for exports, according to Ifo Institute president Hans-Werner Sinn.
"This is a gentle reminder that the German economy is not immune to a major downturn in its partners' economic background," said Michel Martinez, an economist at Societe Generale, in a note to clients.
Despite the overall decline in business sentiment, the index of current conditions in Germany declined only modestly. This should help temper fears of a sharp downturn in German economic activity during the third quarter, said Martinez.
However, the longer-term outlook is bleak. The expectations index fell to its lowest level since June 2009 and is now below its long-term average.