Germany: Sentiment trends even higher raising upside risks to Q2 GDP – Deutsche Bank

Analysts at Deutsche Bank explain that sentiment in Germany ended Q1 on a very strong note with PMI data generally surprising to the upside.

Key Quotes

“The composite PMI (57.0 vs. 56.1 prev.) continued its upward trend especially as manufacturing companies further raised their assessment to a 71-month high (58.3 vs. 56.8) thanks to accelerating output, domestic and foreign orders. Services sentiment improved further (55.6 vs. 54.4) too, with broad based strength in the details but is overall somewhat less buoyant. This suggests that German growth drivers could swing from domestic demand more towards external factors that could potentially overpower the negative impact of political uncertainty on domestic investment.” 

“At these levels PMIs are consistent with 0.7% qoq GDP growth in Q1 with the January/February ifo not far behind (0.6%) and well above our own forecast (0.4%). The limited available hard data for Q1 as well as some temporary effects support our more cautious assessment. However, despite our skepticism with regards to the quantitative implications of the current sentiment levels on realized GDP growth, the further uptrend poses upside risk especially to our Q2 GDP forecast (DBe: +0.3%).”