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Carsten Brzeski, chief economist at ING, notes that the German Ifo index surged to 99.6, up from 98.5 in February, which is the highest level this year and after posting six consecutive drops, the index has just sent a tentative signal of relief for the economy.

Key Quotes

“Both the expectations and the current assessment component increased. Particularly, the sharp improvement in the expectations component to 95.6, from 93.8, provides moderate optimism.”

“Looking at the bigger picture, manufacturing lost much more momentum than the services sector. Needless to say that cars play an important role in this development. The manufacturing sector has been on a downward trend since last August, dragging the entire economy down. In fact, the German economy is currently suffering from a strange and also unique combination of homemade one-off factors such as the delayed introduction of new emission standards in the automotive sector or low water levels which prevented dropping global oil prices from reaching consumers but also a series of external uncertainties.”

“Looking ahead, today’s Ifo index ends a period of pessimism and suggests that not all is bad in the German economy. With some (technical) rebounds in industrial production in February and March, the first quarter for the German economy might not be as weak as some have expected.”