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Germany: Ifo Signals Strengthening Growth‏

ByDanske Markets
Published 01/25/2013, 07:21 AM
Updated 05/14/2017, 06:45 AM
NOTE
2.47%

Ifo expectations continue to increase sharply and is signaling that German growth is gaining speed to around 2% annualised.

Ifo expectations have improved this quickly only twice before -- in 2002 and 2009. In Germany, it could be 2009 all over again.

Ifo Points To Further Improvement
Ifo expectations increased from 97.9 to 100.5 -- well above consensus as we expected. The current level signals German GDP growth of almost 2% y/y.

The pace of increase slowed only slightly from last month's very strong increase. Our ifo expectation model does not signal that ifo expectations should go higher than this. We expect further increases but believe the pace is likely to slow from here.

We do not focus much on the current assessment but believe it is worth taking note that it increased from 107.1 to 108.0 and that this may well be a turning point. It seems that German companies not only expect the economy to improve but that they are actually starting to feel it.

Ifo expectations have improved this quickly only twice before -- in 2002 and 2009 (looking at the three-month moving average). The first one was a false signal and thesecond time it was followed by 4% y/y growth. What is it today? The assessment of the current situation never improved in 2002, while it did -- with a lag -- in 2009. Current conditions improved today and if this is a turning point (we think it is), it might suggest that this is 2009 all over again.

Bear in mind that consensus German GDP growth is just 0.7% (due partly to a negative base effect with little growth in H2 12). This will probably be revised higher in coming months.

To Read the Entire Report Please Click on the pdf File Below.

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