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Germany: The hard and soft data conundrum – ING

According to Carsten Brzeski, chief economist at ING, for the German economy, a wave of fresh hard and soft economic data has once again showed that it currently needs many nuances to understand and analyse the Eurozone’s largest economy.

Key Quotes

“The PMIs were probably the best illustration of slightly opposing signals. While both the PMI manufacturing and the PMI services dropped in May, the composite PMI actually increased to a three-month high. At 52.4, the composite PMI points to stable and positive GDP growth in the second quarter. The reasons for this apparent contradiction are different formulas in computing the series and the fact that the output component in the PMI manufacturing increased.”

“At the same time, the most prominent German leading indicator, the Ifo index dropped for the second month in a row, falling to the lowest level in more than four years. The Ifo index stood at 97.9 in May. However, the drop was exclusively driven by a sharp fall in the current assessment component, expectations remained unchanged. Last but not least, don’t forget the strong 1Q GDP reading this morning, which given the negative growth contribution of inventories actually even understated the growth performance.”

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