Ifo German Business Confidence Poised For 4th Straight Rise

- Headline index expected at 92.0 (prev 90.5)

- Weak Composite PMI Could Mute Gains

- Data Due Tuesday At 08.00 GMT

 

By Eric Culp, European Editor,

LiveSquawk News

@EricCulpLS

 

09.40 GMT

 

Frankfurt, 24 August 2020 (LS NEWS) – German managers are expected to show further optimism about Europe’s largest economy when Ifo releases its August poll results Tuesday, but a slip in the most recent composite purchasing managers’ index may drag on the country’s bellwether gauge for business confidence.

 

Ifo’s August business climate index is forecast higher at 92.0 versus 90.5 in July. The index’s forward-looking expectations component is seen at 98.1 compared to last month’s 97.0, and the current conditions component is expected to improve to 87.0 from 84.5.

 

Nicola Nobile, chief Italian economist at Oxford Economics, said: “The August ifo index should see further gains in a sign of a sustained recovery. However, the increase is likely to be more modest than the recent post-lockdown surge as the recovery path begins to flatten.

 

“Judging by the fall in the August flash composite PMI, Ifo expectations could see a setback, even though we think that further solid gains are in store for firms’ assessment of their business situation.”

 

 

The chop

Economists have warned that Germany’s recovery will likely be choppy, and this month’s flash PMI composite index signals that they may be right. The overall measure slipped to 53.7 from last month’s 55.0 mark on an unexpected slide in the services reading. The sector also faltered in the Eurozone as a whole, where the composite index dropped to 51.6 from 54.9.

 

Jack Allen-Reynolds, senior Europe economist at Capital Economics said, “High frequency data have levelled off in recent weeks, while the fall in the Eurozone Composite PMI for August suggests that the pace of the recovery has slowed. But this has been less marked in Germany,” he noted, adding that his estimate for the Ifo headline number is “about 92.0”, so basically in line with the consensus.

 

Rising Covid-19 cases in Germany are also increasing concerns about the country’s economic rebound. This week, local governments increased restrictions in the financial capital Frankfurt and some of the surrounding areas.

 

Investors weighed in earlier the month, with both the ZEW and Sentix polls showing increased confidence about the future. However, the ZEW’s current conditions measure slipped unexpectedly and fell well short of market expectations.