- German IFO expectations index declined again in June as it went down to 104.8 from 106.2 and is now around the level in fall last year. The current assessment indication was unchanged at 114.8 and did not increase as we had expected. Nevertheless there are signs that German domestic demand is doing well.
- The decline in the IFO expectations index in June mainly followed as the manufacturing index declined around 2 index points. On the other hand the retail trade index was close to 1 index point higher in June compared to May. The decline in the manufacturing component should be due to the lagged impact of the global slowdown, whereas the higher retail trade reflects that German consumers have been less negatively affected.
- Looking ahead the OECD’s leading indicator suggests IFO expectations could decline further. However, the negative impact from the global weakness should slowly start to fade and support domestic demand. The weaker euro will also support economic activity later. In line with that the German PMI manufacturing increased marginally in June while the new export orders component declined at a slower pace.
- Although the IFO expectations index has trended down since January it still suggests increasing industrial production and GDP growth around 1% q/q. Overall we expect strong German activity in 2014 even though GDP growth could be a bit weaker in Q2 as the global weakness in Q1 is set to have a lagged impact.
IFO expectations declined but still suggesting hihgher GDP growth... ... and positive growth in industrial production
Decline in IFO expectations due to manufacturing, retail increased OECD's leading indicator suggests lower IFO expectations
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