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German Ifo sends wake-up call – ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 25, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Carsten Brzeski, Research Analyst at ING, suggests that’s the Germany’s most prominent leading indicator, the just released Ifo index, dropped to 107.3 in January, from 108.6 in December; the lowest reading since February 2015.

    Key Quotes

    “Particularly expectations have taken a hit from recent market turmoil and probably renewed concerns about a slowing of the Chinese economy, dropping to 102.4 in January, from 104.6 in December. The only marginal drop of the current assessment component (to 112.5, from 112.8), however, indicates that the positive growth momentum is currently still there. Even if the Ifo index recently has lost some of its predictive power for GDP growth, the current assessment component has still the best track record in nowcasting real economic activity. Therefore, there is no need to get overly concerned about German growth, yet.

    Nevertheless, over the last months, strong confidence indicators and rather sluggish hard data posed a bit of a new conundrum in the German economy. Now it seems as if the soft data is converging with the hard data, rather than the other way around.

    While at least at first glance the economy is cruising along smoothly on the back of strong domestic demand, the inflow of refugees remains the number one topic in German politics, media and society.

    All in all, today’s Ifo index is clearly not bad enough to kick-start a new economic debate. The refugees and the political reactions will remain topic number one in the coming weeks. However, today’s Ifo index also shows that a scenario which dominated financial markets over the last weeks has finally entered German companies’ boardrooms: it’s the scenario in which extremely low oil prices could do more harm than good (at least to the German economy).”
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