German IFO Index Surges in April, Exceeding Expectations

EURO: German IFO Biz Climate Index: April at 89.4 vs. Expected 88.9

The German IFO Climate index surged to 89.1 in the April month from 87.9 printed in the March month, 88.9 is expected. Business economic assessment index came at 88.9 in the April month from 88.1 printed in the last month and 88.7 is expected. IFO expectations in the next six months rose to 89.9 in the April month from 87.7 printed in the March month. Overall German data came at higher than expected, but EURUSD moved flat after the data printed.

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In April, the German IFO Business Climate Index headline figure showed a substantial increase to 89.4, marking a significant improvement from the March level of 87.9. This figure exceeded market expectations, which had anticipated a reading of 88.9.

Furthermore, the Current Economic Assessment Index also saw a notable uptick from 88.1 in March to 88.9 in April, surpassing the forecasted value of 88.7.

Additionally, the IFO Expectations Index, which reflects firms’ outlook for the upcoming six months, demonstrated a strong rise to 89.9 in April, compared to 87.7 in March. This exceeded the anticipated value of 88.9, indicating increased optimism among businesses regarding future economic prospects.

EURO: German IFO Biz Climate Index Up for 3rd Month

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In April, German business sentiment continued its upward trajectory for the third consecutive month, as revealed by a closely monitored survey. Despite expectations of sluggish economic growth in the early months of the year, companies in Germany displayed increased optimism.

According to data released by the Ifo Institute on Wednesday, the Ifo business-climate index climbed from 87.9 in March to 89.4 in April, surpassing the consensus forecast of economists, which had projected a figure of 88.8, as reported by The Wall Street Journal.

Clemens Fuest, president of the Ifo Institute, noted, “The economy is stabilizing, especially thanks to service providers.” He further highlighted that companies expressed greater satisfaction with their current business situation, while their expectations for the future also showed improvement.

Despite this positive trend, Germany’s economic performance still lags behind other economies in the eurozone. According to the Bundesbank’s assessment last week, the country’s economy is expected to have experienced only marginal growth in the first quarter of 2024.

EURO: German Business Sentiment Surges in April, Exceeding Expectations: Ifo

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A survey released on Wednesday showed that German business sentiment experienced a stronger-than-expected improvement in April, raising hopes that Europe’s largest economy may be turning a corner, although a robust recovery is not anticipated.

According to the Ifo institute, the business climate index rose to 89.4 in April, surpassing analysts’ expectations of 88.8 as per a Reuters poll. This marked the third consecutive increase, with the March reading slightly revised to 87.9.

Jens-Oliver Niklasch, senior economist at LBBW, remarked, “The third rise in a row and the second strong increase in a row. That looks like a trend reversal.” However, he also cautioned, “You have to remain cautious in difficult times, but at least there is now some evidence to suggest that we saw the bottom of the economy in winter.”

Earlier in the week, the flash HCOB purchasing managers’ index (PMI) indicated a boost in business activity, particularly in the services sector, with the April reading exceeding forecasts and reaching its highest level in 10 months.

Franziska Palmas, senior Europe economist at Capital Economics, highlighted that the rise in the German Ifo index in April, coupled with the surge in the composite PMI, suggests that the German economy might have passed its lowest point. However, Palmas noted that unlike the PMI, the Ifo index remained in contractionary territory.

The Ifo survey revealed that overall morale was lifted by companies reporting increased satisfaction with their current business situation, while future expectations also improved significantly. Both these indexes surpassed forecasts, with expectations rising to 89.9 compared to the predicted 88.7, and the assessment of the current situation climbing to 88.9, slightly above the expected 88.7.

Clemens Fuest, president of Ifo, stated, “The economy is stabilizing, especially thanks to service providers.”

The German government is expected to revise its growth forecast for this year upward to 0.3%, from 0.2% previously, at a news conference later on Wednesday, according to a source cited by Reuters last week.

Despite signs of improvement, Germany is anticipated to enter another technical recession in the first quarter of this year, following a 0.3% contraction in the final quarter of last year. Last year, Germany lagged behind its large eurozone peers due to high energy costs, weak global orders, and record-high interest rates.

Jeroen van den Broek, ING’s global head of sector research, commented that the third consecutive rise in the Ifo index provides further evidence of a bottoming out of the German economy. However, he cautioned that while the cyclical trough may be behind, a strong recovery is not necessarily imminent.

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