Home Germany: Unchanged Ifo index finally brings some good news to the Eurozone – ING
FXStreet News

Germany: Unchanged Ifo index finally brings some good news to the Eurozone – ING

Carsten Brzeski, Chief Economist at ING, explains that after five consecutive drops, Germany’s most prominent leading indicator, the Ifo index, remained unchanged in May, after an upward revision of the April data, keeping the hopes of an economic rebound alive.

Key Quotes

“While the current assessment component increased to 106.0, from 105.8, the expectation component dropped once again (to 98.5, from 98.7), illustrating increased worries from ongoing trade tensions.”

“The Ifo index had been on a worrying downward slide for five months in a row. Last time the Ifo index experienced such a downward correction was in 2014. Obviously, such a trend raises doubts about the strength of the recovery and opens the stage for advocates of an end to Germany’s long and impressive growth performance, which started in 2009.”

“Supply-side factors are increasingly hampering Germany’s growth prospects. Both equipment and labour are currently at their highest levels ever as limiting factors to production. Against this background, more investment seems to be the best and easiest way forward. It would increase production capacity and could lift the current speed limits.”

“After weeks and months of disappointing data from Germany and the entire Eurozone, today’s Ifo reading brings some relief. However, the fact that no change is already good news also shows how sharp expectations for the entire Eurozone have been revised downwards recently. Let’s hope that today’s Ifo index is the start of another rebalancing of expectations and reality. The rollercoaster ride between eu(ro)phoria and fears of a new euro crisis needs some middle ground. The next weeks will tell whether today’s Ifo was a huge sigh of relief and the start of a new rebound or simply a brief stopover on a longer downward slide.”

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.