Video

Kay Van-Petersen
Saxo's global macro strategist Kay Van-Petersen examines the big issues over the next few days for the markets including Mario Draghi's, president of the European Central Bank (ECB), speech on Thursday regarding the bank's stance on interest rates.
Article / 24 April 2013 at 8:51 GMT

Ifo: German business optimism fades

Bottom line: The German economy likely expanded yet again in April albeit at a slower pace and should continue to do so in the coming quarters, according to Ifo. However, expectations have eased in recent months suggesting that growth will be only moderate this year. Q1 GDP is on track for a gain of 0.3 percent QoQ.

 German Ifo

Details: The Ifo business climate index declined by 3.3 points to 104.4 in April from 106.7 previously while consensus had only expected a decline to 106.2. The decline was equally divided between the current assessment and expectations components with the former falling to 107.2 from 109.9 while expectations dropped to 101.6 from 103.6. It is the second straight monthly drop in the Ifo business climate index (and the two components) and brings the index back to levels last seen in January (104.3).

The uncertainty about the euro area remains a key concern, including the political situation in Italy where 87-year old President Napolitano agreed to (and won the vote to) remain in office for another seven years last week after none of the other candidates could garner enough support. Furthermore, conditions for exporters continue to be challenging and have not been aided by the euro rallying more than 10 percent since the low back in the summer of 2012. The euro has, however, stabilised in the last few months (at levels similar to those in 4Q'11).

Despite the decline in Ifo, we expect Germany to defy the overall euro area recession this year and post growth similar to last year's (0.9 percent) though risks are mostly to the downside (due to the weak display in 4Q'12, which means a weak starting point for 2013). The foreign sector of the German economy will benefit from somewhat stronger global trade growth while domestic demand is expected to increase. There is not much need for fiscal consolidation - Germany has even managed to balance its budget two years ahead of time - and private consumption will be aided by a robust labour market, rising real wages, and generally sound household balance sheets.

 German Ifo vs GDP

6y
Mickette Mickette
The Ifo Business-Cycle clock has changed. Nearly in the downswing area.
6y
Massimo Russo Massimo Russo
If last IFO will ope the possibility of cut interest rate by ECB, I think that euro equity markets will recover the loss of the last precedind 2 weeks
6y
Mickette Mickette
I agree with Massimo.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail