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22 May 2015
German Ifo drops only marginally in May – ING
FXStreet (Barcelona) - Carsten Brzeski of ING reviews the German Ifo data release and further notes that the recent data out of Germany suggests fundamentals remain supportive for another acceleration in the economy.
Key Quotes
“German business confidence only gave in marginally, illustrating almost imperturbable optimism. Contrary to this week’s ZEW and PMI readings, Germany's most prominent leading indicator, the Ifo index, remained almost unchanged, dropping to 108.5 in May, from 108.6 in April. While the current assessment component improved to its highest level since May last year, expectations dropped to 103.0, from 103.5 in April.”
“With today’s GDP data, yesterday’s PMIs and now the Ifo, new doubts about the strength of the German economy could emerge again. In our view, any of these swan songs on the German economy are premature. However, it is simply a fact that Germany is at the end of a very positive reform-growth cycle, which is artificially extended by external tailwinds.”
“In addition, given the long recovery the German economy has already gone through, it is only more than normal that growth rates at some point in time will be lower than in the rest of the Eurozone, which in turn has been suffering from weak growth now for several years.”
“In the short run, the fundamentals are sound enough to see another acceleration of the German economy. This is also reflected in today’s increase in the Ifo’s current assessment component.”
“As orders at hand have increased again and inventories have dropped, industrial production should support growth in the coming months.”
“Moreover, and probably even more important, the strong labour market, higher wages and low interest rates should further drive consumption and the construction sector. Finally, the weaker euro should continue to boost German exports.”
Key Quotes
“German business confidence only gave in marginally, illustrating almost imperturbable optimism. Contrary to this week’s ZEW and PMI readings, Germany's most prominent leading indicator, the Ifo index, remained almost unchanged, dropping to 108.5 in May, from 108.6 in April. While the current assessment component improved to its highest level since May last year, expectations dropped to 103.0, from 103.5 in April.”
“With today’s GDP data, yesterday’s PMIs and now the Ifo, new doubts about the strength of the German economy could emerge again. In our view, any of these swan songs on the German economy are premature. However, it is simply a fact that Germany is at the end of a very positive reform-growth cycle, which is artificially extended by external tailwinds.”
“In addition, given the long recovery the German economy has already gone through, it is only more than normal that growth rates at some point in time will be lower than in the rest of the Eurozone, which in turn has been suffering from weak growth now for several years.”
“In the short run, the fundamentals are sound enough to see another acceleration of the German economy. This is also reflected in today’s increase in the Ifo’s current assessment component.”
“As orders at hand have increased again and inventories have dropped, industrial production should support growth in the coming months.”
“Moreover, and probably even more important, the strong labour market, higher wages and low interest rates should further drive consumption and the construction sector. Finally, the weaker euro should continue to boost German exports.”