german ifo jan 19 business climate reaction
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ANGST ABOUT FUTURE SOURS MOOD AT GERMAN COMPANIES
  • Ifo Jan Business Sentiment Drops To 99.1 from 101.0 in Dec
  • Expectations Fall To Six-Year Low Of 94.2 v 97.3
  • Current Conditions Beat Consensus, Ease To 104.3 v 104.9

 

Frankfurt, 25 Jan (LS News) – Business confidence in Europe’s biggest economy fell to its lowest level in nearly three years on increased concerns about the next six months.

 

This month’s headline business climate index fell to 99.1 to miss the consensus of 100.7 and the 101.0 reading in December.

 

ING Chief German Economist Carsten Brzeski called the January number “a shocker”.

 

The forward-looking expectations component hit its lowest level since November 2012 when it dropped to 94.2, which was well short of the consensus of 97.1 and last month’s 97.3 print. The current situation component eased to 104.3 but beat the forecast of 104.2.

 

All three measures of Ifo business sentiment have been declining since September.

Growth Worries On The Rise

 

Commenting on the January data, Ifo said: “The German economy is experiencing a downturn.”

 

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Whatever optimism we had left about the Eurozone economy is steadfastly being destroyed by the incoming data. This is a horrible start to the year for German business sentiment.”

 

The German business newspaper Handelsblatt reported Thursday that Berlin has slashed its 2019 GDP growth forecast to 1.0pct from 1.8pct. The European Central Bank downgraded its economic outlook for the Eurozone Thursday, saying growth risks are now tilted to the downside instead of broadly balanced.

 

Last month, Ifo cut its 2019 GDP growth forecast for Germany to 1.1pct from 1.9pct. This week, the International Monetary Fund joined the wide range of institutions expecting a weaker performance from Europe’s economic powerhouse by lowering its growth estimate for this year to 1.3pct from its October projection of 1.9pct.

 

The German government said earlier this month that the economy expanded at its lowest rate in five years in 2018.

 

The results of the Ifo poll moved in the opposite direction of Thursday’s IHS Markit purchasing managers’ index for January. Germany’s composite PMI rose unexpectedly to 52.1 to distance itself from the growth-contraction line of 50 thanks to increased optimism in the service sector.

 

--- Eric Culp

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