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Carsten Brzeski, chief economist at ING, points out that the German Ifo index, dropped to 99.2 in April, from 99.7 in March as both the current assessment and the expectations components dropped.

Key Quotes

“The (temporary) Brexit relief, the gradual weakening of the trade-weighted exchange rate as well as positive macro news from China and tentative signs of improvement in global trade were not enough to boost German companies’ optimism.”

“Another interesting aspect of the current downswing of the German economy is the fact that downturns normally follow on prior excesses. The German economy, however, did not show any excesses that would require a cleansing correction. Consequently, the economy is currently witnessing the slowdown which basically came from nowhere.”

“At first glance, today’s drop in the Ifo index seems to dent any optimism for German growth. At second glance, however, the picture is much more complex.”

“Looking ahead, the reversal of last year’s one-off factors, some encouraging recent evidence from global activity as well as continued solid domestic fundamentals are in our view still strong arguments in favour of a brightening outlook for the German economy.”

“In fact, in the light of many rather pessimistic headlines on the German economy, the first quarter might actually surprise to the upside. Judging from all available data so far, retail sales, car sales, employment, exports and construction were all stronger than in 4Q18.”