FRANKFURT, Dec 19: German business confidence slumped in December, a key survey showed on Wednesday, with many analysts saying the biggest eurozone economy had now clearly shifted into a lower gear.

“The vast majority of indicators are pointing to a further slowdown of the German economy,” Commerzbank analyst Ralph Solveen said.

At UBS, Reto Huenerwadel added: “The latest Ifo release suggests that the slowdown of actual business activities is increasingly becoming a reality.”

In the closely watched business climate index, calculated each month by the Munich-based economic research institute Ifo, the December reading fell to 103 points from 104.2 points in November, when it had risen from 103.9 points.

Market forecasts had expected a December level of 103.5 points as the economy was hit by high oil and food prices, a strong euro and tight credit conditions following the collapse of the US market for high-risk mortgages.

The head of Ifo, Hans-Werner Sinn, said the survey showed that while companies assessed their current situation less positively, the overall rating was still above the long-term average.

“The outlook for the coming six months continues to be assessed cautiously,” Sinn added in a statement. For its monthly survey, Ifo polls 7,000 companies about their assessment of current business and their expectations for the next six months.

The current situation sub-index dropped from 110.3 in November to 108.1 this month, while the expectations index was relatively stable, slipping only slightly to 98.2 points.

Broken down by sector, business sentiment showed the biggest drop in retailing -- bad news for officials who have hoped consumption would pick up and become an engine of growth as exports were curbed by the strong euro.

“The business climate in retailing has again clouded over, with a particular worsening in assessments of the current situation,” the Ifo statement said.

That measure “has been given the most unfavourable marks in the past two years,” it added.

Solveen said: “In the retail sector there seems to be no light at the end of the tunnel.” The manufacturing climate also worsened, in particular regarding the current situation.

“The release confirms that the business climate is clearly trending downward,” said BNP Paribas economist Frederique Cerisier.—AFP