German Ifo Business Morale Stalls Ahead Of Likely ECB Rate Cut
- Readings fall short of market forecasts
- Outlook exceeds expectations
- Disappointing results follow rise in German PMIs
- ECB set to reduce borrowing costs in June
- Economic recovery coming “step by step” – Ifo
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
27 May 2024 | 08:50 GMT
FRANKFURT – German companies said they viewed their prospects with less optimism than analysts had expected just over a week before the European Central Bank was expected to start a cycle of rate reductions.
Germany’s Ifo economics institute said Monday that the results of this month’s survey of local managers showed an unchanged headline reading of 89.3 points, which was the April result after a downward revision of one-tenth, leaving the lead number for May short of the 90.4 market estimate.
The expectations component of the index – a measure for the coming six months – rose to 90.4 points, the highest mark in more than a year. But the measure fell short of the 90.8 market forecast while outpacing the downwardly revised April reading of 89.7.
The current conditions component fell unexpectedly to 88.3 points from 88.9 and was significantly lower than the 89.8 mark predicted by pundits.
“The manufacturing, trade, and construction sectors are recovering, although the service sector took a slight hit,” Ifo said. “Germany’s economy is working its way out of the crisis step by step.”
EUR/USD fell on the news before rebounding as the session progressed.
More mixed signals from Europe’s biggest economy
The lower-than-expected Ifo results came just days after a poll of purchasing managers voiced increased optimism about the world’s fourth-largest economy. Preliminary data showed that the composite index from this survey beat forecasts, with both the manufacturing and service industry components rising more than expected. But the former reading remained mired in contraction territory below 50 points, bad news indeed for a country with such a heavy reliance on industrial output.
“Looking ahead, and despite today’s cold shower, the German economy should gain more momentum,” wrote Carsten Brzeski, head of macroeconomics at ING. “Strong wage growth should fuel a cautious recovery in private consumption and even the inventory cycle should gradually start to turn positive.
“However, this cyclical improvement does not mean everything is suddenly hunky-dory again in Germany. There are still several cyclical factors potentially dragging down economic activity. Higher oil prices as a result of the ongoing military conflicts in the Middle East could easily weigh on industry and exports once again.”
- Readings fall short of market forecasts
- Outlook exceeds expectations
- Disappointing results follow rise in German PMIs
- ECB set to reduce borrowing costs in June
- Economic recovery coming “step by step” – Ifo
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
27 May 2024 | 08:50 GMT
FRANKFURT – German companies said they viewed their prospects with less optimism than analysts had expected just over a week before the European Central Bank was expected to start a cycle of rate reductions.
Germany’s Ifo economics institute said Monday that the results of this month’s survey of local managers showed an unchanged headline reading of 89.3 points, which was the April result after a downward revision of one-tenth, leaving the lead number for May short of the 90.4 market estimate.
The expectations component of the index – a measure for the coming six months – rose to 90.4 points, the highest mark in more than a year. But the measure fell short of the 90.8 market forecast while outpacing the downwardly revised April reading of 89.7.
The current conditions component fell unexpectedly to 88.3 points from 88.9 and was significantly lower than the 89.8 mark predicted by pundits.
“The manufacturing, trade, and construction sectors are recovering, although the service sector took a slight hit,” Ifo said. “Germany’s economy is working its way out of the crisis step by step.”
EUR/USD fell on the news before rebounding as the session progressed.
More mixed signals from Europe’s biggest economy
The lower-than-expected Ifo results came just days after a poll of purchasing managers voiced increased optimism about the world’s fourth-largest economy. Preliminary data showed that the composite index from this survey beat forecasts, with both the manufacturing and service industry components rising more than expected. But the former reading remained mired in contraction territory below 50 points, bad news indeed for a country with such a heavy reliance on industrial output.
“Looking ahead, and despite today’s cold shower, the German economy should gain more momentum,” wrote Carsten Brzeski, head of macroeconomics at ING. “Strong wage growth should fuel a cautious recovery in private consumption and even the inventory cycle should gradually start to turn positive.
“However, this cyclical improvement does not mean everything is suddenly hunky-dory again in Germany. There are still several cyclical factors potentially dragging down economic activity. Higher oil prices as a result of the ongoing military conflicts in the Middle East could easily weigh on industry and exports once again.”
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