German Ifo shows unstoppable optimism - ING

FXStreet (Barcelona) - “Is the sky the limit?” quotes Carsten Brzeski of ING, as he reviews the German Ifo data release, noting that the German business optimism seems to be unstoppable, paving the road for an excellent year of growth.

Key Quotes

“Germany's most prominent leading indicator, the Ifo index, has increased for the sixth month in a row to 108.6 in April, from 107.9 in March. While the current assessment component improved to 113.9, its highest level since June last year, expectations weakened somewhat to 103.5, from 103.9 in March.”

“The German economy is in decent shape. The first months of the year point to a good, though not excellent, growth performance in the first quarter and the next quarters should not be very different. In fact, Germany remains the biggest beneficiary of the euro crisis and the ECB’s QE. Even if the weak euro has not yet entirely found its way to strong export numbers, at some point in time it should.”

“Moreover, strong domestic demand on the back of record high employment, wage increases, low energy prices and a new appetite for consumption, driven by record low interest rates, has become an important growth driver for the German economy.”

“Yesterday’s GfK index confirmed the picture of almost euphoric consumers. At 10.1, the index is now at its highest level since October 2001.”

“However, before becoming too lyrical about the German economy and jumping on the bandwagon of upwardly revised growth forecasts, a brief glance at today’s expectation component and yesterday’s PMIs justifies some caution. Moreover the Greek crisis but also an unexpectedly long soft spell of the US economy and a further weakening of the Chinese economy provide reasons enough not to be overoptimistic.”