FRANKFURT –– Managers in Europe’s largest economy this month defied market expectations and the doom and gloom overshadowing the world economy by reporting rosier views about their present situation.
Germany’s Ifo economics institute said Thursday that the results of this month’s survey of domestic companies showed its headline business climate reading improving two-tenths to 86.9 points. Economists had anticipated a drop to 85.2.
The gain in the Ifo headline reading came solely from the index’s current assessment component. It climbed to 86.4 to outpace the estimate of 85.4 and last month’s 85.7 result.
The index's expectations measure for the coming six months eased to 87.4 points, just short of the 87.7 reading in March but above the market forecast of 85.4.
“Uncertainty among the companies has increased,” Ifo said. “The German economy is preparing for turbulence.”
Preparing for? Europe’s largest economy, like virtually every other nation, is clearly battling the chop caused by the oft-indecipherable US trade policy that changes on a whim.
But the country does have some reason to look forward to the future. Ifo said its construction index rose to the highest level since May 2023. Germany plans to spend some EUR 1 tn on domestic infrastructure and defence over the next 12 years.
The economic thinktank noted that the service sector also showed more confidence, with manufacturing and trade industries reporting less optimism.
Source: Ifo
Against the trend
The surprise upturn in business morale followed a plunge in investor confidence earlier this month and flagging hopes among purchasing managers. Wednesday’s release of flash April data showed the composite PMI reading for Germany falling to 49.7 points and below the growth-contraction line at 50. The poor performance was mostly driven by a larger-than-expected decline in the services component, which dropped to 48.8 points from 50.9. The manufacturing reading of 48.0 was three-tenths lower than in March but beat the market expectation of 47.6.
One analyst sees upside for the world’s fourth-largest economy. “The conditions for an economic improvement in Germany have been worse,” noted Michael Herzum from Union Investment. “With the agreement on the infrastructure package in Germany, a long-standing source of uncertainty has been transformed into a positive signal.
“And the timely formation of a government in Germany ensures the necessary political capacity to act. Further positive developments have also emerged from Europe. The increasing EU initiatives to reduce bureaucracy and strengthen the economy are improving the situation. Overall, there is light at the end of the tunnel for German companies.”
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- View of present boosts headline measure
- Expectations ease
- Results follow falling PMIs
- Construction outlook surges
- Homegrown plans fan optimism
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
24 April 2025 | 09:00 GMT
FRANKFURT –– Managers in Europe’s largest economy this month defied market expectations and the doom and gloom overshadowing the world economy by reporting rosier views about their present situation.
Germany’s Ifo economics institute said Thursday that the results of this month’s survey of domestic companies showed its headline business climate reading improving two-tenths to 86.9 points. Economists had anticipated a drop to 85.2.
The gain in the Ifo headline reading came solely from the index’s current assessment component. It climbed to 86.4 to outpace the estimate of 85.4 and last month’s 85.7 result.
The index's expectations measure for the coming six months eased to 87.4 points, just short of the 87.7 reading in March but above the market forecast of 85.4.
“Uncertainty among the companies has increased,” Ifo said. “The German economy is preparing for turbulence.”
Preparing for? Europe’s largest economy, like virtually every other nation, is clearly battling the chop caused by the oft-indecipherable US trade policy that changes on a whim.
But the country does have some reason to look forward to the future. Ifo said its construction index rose to the highest level since May 2023. Germany plans to spend some EUR 1 tn on domestic infrastructure and defence over the next 12 years.
The economic thinktank noted that the service sector also showed more confidence, with manufacturing and trade industries reporting less optimism.
Against the trend
The surprise upturn in business morale followed a plunge in investor confidence earlier this month and flagging hopes among purchasing managers. Wednesday’s release of flash April data showed the composite PMI reading for Germany falling to 49.7 points and below the growth-contraction line at 50. The poor performance was mostly driven by a larger-than-expected decline in the services component, which dropped to 48.8 points from 50.9. The manufacturing reading of 48.0 was three-tenths lower than in March but beat the market expectation of 47.6.
One analyst sees upside for the world’s fourth-largest economy. “The conditions for an economic improvement in Germany have been worse,” noted Michael Herzum from Union Investment. “With the agreement on the infrastructure package in Germany, a long-standing source of uncertainty has been transformed into a positive signal.
“And the timely formation of a government in Germany ensures the necessary political capacity to act. Further positive developments have also emerged from Europe. The increasing EU initiatives to reduce bureaucracy and strengthen the economy are improving the situation. Overall, there is light at the end of the tunnel for German companies.”
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