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Danske Daily: Expect Modest Improvement In German IFO

ByDanske Markets
Published 07/25/2013, 08:20 AM
Updated 05/14/2017, 06:45 AM

We expect German IFO expectations to improve, adding to the recent positive sentiment in the euro area. Based on our model for IFO expectations we foresee a modest improvement which should not be as strong as yesterday's German PMI figure. Nevertheless, IFO expectations have recently pointed to stronger German growth than suggested by new orders for composite PMI. Last month's improvement in IFO expectations indicates growth around 0.5% q/q in Q2. We expect German GDP growth to be around 0.4% q/q in Q2 up from 0.1% q/q in Q1.

Monetary development in the euro area is also likely to attract attention. Credit dynamics in the euro area remain subdued and monthly loan flows to the private sector have declined since April 2012. On the other hand, the annual growth in M1 suggests euro area growth around 0.5% q/q on a six-month horizon. We do not expect such a strong pickup but it points to growth well above zero six months from now.

UK Q2 GDP growth is expected to show an increase of 0.6% q/q. If the figure comes out as strong as expected we should not expect any additional measures from BoE apart from further details on the forward guidance. In the US both durable goods and initial jobless claims will attract attention. The most important Q2 earnings reports are Coca-Cola, General Motors and Statoil in the Nordic region.

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