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German Business Confidence Plunges

Confidence hit a more than three-year low as manufacturers in Europe's biggest economy are becoming increasingly pessimistic about their export prospects.

BERLIN (AP) -- German business confidence has hit a more than three-year low as manufacturers in Europe's biggest economy are becoming increasingly pessimistic about their export prospects amid world market turbulence, a closely watched survey found Wednesday.

The Ifo institute said its business climate index fell to 92.9 points in September from 94.8 in August. The decline was steeper than economists' predictions of a drop to 94.3.

The fall -- the fourth in a row -- put the index at its lowest level since May 2005, when it stood at 92.3.

Ifo found that businesses were "considerably more dissatisfied" with their current situation than they were last month, while their outlook for the next six months also darkened.

A subindex measuring the current situation slid to 99.8 points from 103.2; a section measuring companies' outlook declined to 86.5 from 87.

Manufacturers "are more reserved with regard to their export opportunities" and very few plan to hire extra staff, Ifo president Hans-Werner Sinn said in a statement.

"There is an ongoing negative influence from global financial market turbulence that is fanning recession fears, which has apparently not been offset significantly by the recent downward correction of oil prices and the concurrent retreat of the euro," said Timo Klein, an economist at Global Insight in Frankfurt.

The 15-nation euro peaked at more than US$1.60 in July but has since declined. It was trading a little below US$1.47 on Wednesday.

Economist Alexander Koch at UniCredit said weakening foreign demand and a worsening outlook for other big countries in the euro zone could further undermine business confidence.

"All in all, we don't see good chances for a quick trend reversal until the end of the year," said Koch said.

Confidence in the retailing and wholesaling sectors also worsened, although it improved slightly in the construction industry, Ifo said. Consumer confidence in Germany also has been falling.

The German economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined. The 0.5 percent contraction followed healthy growth of 1.3 percent in the first quarter.

The government has stuck to its forecast for full-year economic growth of 1.7 percent.

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