Flash Comment

Euroland: Ifo strong again

Wed, Mar 26 2008, 15:02 GMT
by Allan von Mehren

Danske Bank A/S


Overview: The German ifo managed to surprise on the upside again, mostly driven by an increase in the assessment of the current situation. Expectations also rose slightly. The number underlines the resilience of the German economy and suggests that the slowdown in Germany is further away than expected. We still expect, however, that the current strong headwinds will eventually slow down the German economy to below potential during H2 08.

Details: The overall ifo index rose from 104.1 in February to 104.8 in March (consensus was 103.5). The main improvement came in the current assessment index, which rose from 110.3 to 111.5, but expectations also rose slightly from 98.2 to 98.4. The improvement is again driven by consumer goods, whereas manufacturing is slightly lower. Actually, the manufacturing expectations index points to some slowing in the German PMI manufacturing (see chart overleaf). Export expectations also fell slightly. Hence, the strength cannot be explained by strong exports, which is mirrored by the slowdown in actual export growth. Instead the retail sector is behind the overall strength, which is very hard to square with the significant weakness we have seen in the private consumption and retail sales numbers in Germany over the past quarters.


Published on  Wed, Mar 26 2008, 15:05 GMT

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