The morale of German companies reaches its lowest level in more than a year

BERLIN (Reuters) – Germany 's business confidence plummeted in June to its lowest level in more than a year, suggesting that the mood of business leaders in the world' s largest economy was down. Europe darkens as the world heads for a trade war.

Activity in the four economic sectors measured by the Ifo Institute in Munich in the Monday survey – manufacturing, services, trade and construction – dropped, adding to signs that the economy is getting worse. Cool after a boom last year.

Ifo said its business climate index fell to 101.8, the lowest level since May 2017. The reading was slightly stronger than expected in a Reuters consensus forecast of 101.7.

"The tailwind appreciated by the German economy is (easing)," said the head of Ifo Clemens Fuest.

But economists have ruled out a recession and predicted the economy would continue to grow, albeit at a slower pace than 2.5% last year.

"The modest fall reaffirms our … narrative of an economy slowing down to a normal growth level," Uwe Burkert of LBBW Bank wrote in a note. "This is not a slowdown and certainly no recession."

A large part of the German data published this year showed a cooling economy.

Industrial activity and exports have been weak over the first four months, and US President Donald Trump is now threatening to impose high tariffs on imports of cars from Europe – a trade dominated by Germany – in addition to unilateral rights on metals.

German business leaders also fear that a parallel trade confrontation between Washington and Beijing will hurt exporters who depend on the world's two largest economies for their growth.

"The boom is over.The German economy is moving towards normalization," economist Klaus Wohlrabe told Reuters.

"The discussion on a trade war, triggered by Trump, weighs on the mood." The uncertainty has increased slightly.