IFO business climate offers no sign of rebound
The IFO business climate index is a well respected early indicator of economic development in Germany. The headline release came in yesterday at 99.2 vs 99.9 expected. Check out the release here reported by Justin. The IFO was being eyed for any signs of German recovery. The industrial sector is continuing to drag on the German economy and the German government are projecting economic growth at 0.5% this year. The Brexit relief, weakening of the trade weighted exchange rate ,and the trickle of positive US/China trade dispute have not translated in an uptick in German optimism.
ING reported that the sector components of the German economy demonstrate a dichotomy. On the one hand the manufacturing sector is weak, while the services and construction sectors have improved. They point out that there are full order books and assured production through to the summer. They also points out that retails sales, car sales, employment and construction levels were all stronger than in 4Q 2018. They make the point that the the 1Q 2019 may surprise to the upside.
I think Germany's manufacturing sector is being pushed and pulled by the US/China global growth issues on the one hand and sits under the shadow of Trump's threat to EU car imports on the other. A relief on the US/China trade dispute should bring relief to German manufacturing. However, the US China trade deal has been long on promise, but short on delivery. It is is starting to feel like winter, but never Christmas.
