FRANKFURT – German managers voiced more overall optimism about Europe’s largest economy for the sixth consecutive month in April, but there was disparity in the details of their opinions released Monday.
The headline business climate index for Germany compiled by the country’s Ifo economics institute advanced to 93.6 points this month – its best since Russia attacked Ukraine in late February of last year -- to beat the downwardly revised 93.2 reading from March and the market estimate of 93.4.
The benchmark measure received support exclusively from the component covering the next six months, which also rose for the sixth straight month to a 92.2, also the best mark since the start of the war, which beat the estimate of 91.1 and March’s downwardly revised 91.0 reading. The current conditions component of the overall index declined unexpectedly, falling to 95.0 to miss the market forecast of 96.0 and last month’s reading of 95.4.
EUR/USD pushed above 1.10 just short of an hour after the release of the data.
“German business’s worries are abating, but the economy is still lacking dynamism,” Ifo said. It noted that opinions about manufacturing improved, but confidence in the service sector, which had long been supporting the overall index, has plateaued, with pessimism now the mood going forward.
Mixed views
Capital Economics said, “The small increase in the Ifo business climate index in April confirms that the German economy remained resilient in the face of higher interest rates at the start of Q2. But the survey was much more downbeat than the PMIs released on Friday.”
Much like Monday’s Ifo poll results, preliminary April purchasing managers’ indices for Germany pointed in two different directions. The manufacturing measure eased unexpectedly while the services gauge rose more than forecast. This allowed the overall composite reading to improve enough to beat the market estimate, and the resulting 53.9 points remained well above the growth-contraction line at 50.
Financial market experts also offered varying takes on Germany this month: the forward-looking indicator from the country’s ZEW economics institute surprised economists with a second straight decline in April, but the view of the present showed unanticipated strength.
“Overall, the Ifo is a reminder that the German economy is still facing substantial headwinds from rising interest rates and depressed household incomes,” Capital Economics said. “We still expect the economy to remain weak in the next few months.”
But Thomas Gitzel, the chief economist at VP Bank, pointed out that so far, things have turned out much better than expected. “Measured against what was originally feared, the German economy is doing extremely well. The ifo business climate index climbed for the sixth month in a row, brushing aside fears of a recession.”
And the latest improvement in the outlook came as companies gird for another expected interest rate hike – what would be the seventh in a row – from the European Central Bank, which is scheduled to announce its latest monetary policy decision next week. The lender raised its main rates by half a percentage point last month.
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- Opinion on present situation worsens unexpectedly
- Outlook, overall mood highest since start of Russia-Ukraine war
- Businesses could face even higher borrowing costs
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
24 April 2023 | 09:00 GMT
FRANKFURT – German managers voiced more overall optimism about Europe’s largest economy for the sixth consecutive month in April, but there was disparity in the details of their opinions released Monday.
The headline business climate index for Germany compiled by the country’s Ifo economics institute advanced to 93.6 points this month – its best since Russia attacked Ukraine in late February of last year -- to beat the downwardly revised 93.2 reading from March and the market estimate of 93.4.
The benchmark measure received support exclusively from the component covering the next six months, which also rose for the sixth straight month to a 92.2, also the best mark since the start of the war, which beat the estimate of 91.1 and March’s downwardly revised 91.0 reading. The current conditions component of the overall index declined unexpectedly, falling to 95.0 to miss the market forecast of 96.0 and last month’s reading of 95.4.
EUR/USD pushed above 1.10 just short of an hour after the release of the data.
“German business’s worries are abating, but the economy is still lacking dynamism,” Ifo said. It noted that opinions about manufacturing improved, but confidence in the service sector, which had long been supporting the overall index, has plateaued, with pessimism now the mood going forward.
Mixed views
Capital Economics said, “The small increase in the Ifo business climate index in April confirms that the German economy remained resilient in the face of higher interest rates at the start of Q2. But the survey was much more downbeat than the PMIs released on Friday.”
Much like Monday’s Ifo poll results, preliminary April purchasing managers’ indices for Germany pointed in two different directions. The manufacturing measure eased unexpectedly while the services gauge rose more than forecast. This allowed the overall composite reading to improve enough to beat the market estimate, and the resulting 53.9 points remained well above the growth-contraction line at 50.
Financial market experts also offered varying takes on Germany this month: the forward-looking indicator from the country’s ZEW economics institute surprised economists with a second straight decline in April, but the view of the present showed unanticipated strength.
“Overall, the Ifo is a reminder that the German economy is still facing substantial headwinds from rising interest rates and depressed household incomes,” Capital Economics said. “We still expect the economy to remain weak in the next few months.”
But Thomas Gitzel, the chief economist at VP Bank, pointed out that so far, things have turned out much better than expected. “Measured against what was originally feared, the German economy is doing extremely well. The ifo business climate index climbed for the sixth month in a row, brushing aside fears of a recession.”
And the latest improvement in the outlook came as companies gird for another expected interest rate hike – what would be the seventh in a row – from the European Central Bank, which is scheduled to announce its latest monetary policy decision next week. The lender raised its main rates by half a percentage point last month.