FXStreet (Edinburgh) – Analyst at ING Bank Carsten Brzeski reviewed the recent figures from the German IFO indicator for the current month.
Key Quotes
“Even if the doses has been reduced somewhat, the German economy is still on steroids. Despite some recent rebounds, the weak euro exchange rate and low energy prices are still artificially extending the last phase of a very positive reform-growth cycle. Even after today’s drop, the level of the Ifo remains comfortably high. In fact, comparing the levels of the second quarter with the levels of the first quarter suggests a growth acceleration of the German economy in Q2, confirming our positive growth outlook”.
“Looking beyond the second quarter, the German economy currently faces three major risks: : i) the never-ending Greek crisis, which despite latest positive developments is still far from being solved and could re-escalate quickly almost any time; ii) a longer-than-expected periods of weakness of the US and the Chinese economy (both accounting for 15% of total German trade); and iii) the lack of new reforms to further reduce unemployment and tackle the current investment gap combined with the deficit in digitalization could eventually backfire on the German economy once the current favourable tailwinds disappear”.
“Last month, Grexit fears were discussion topic number one on German streets, pubs and even boardrooms. With latest developments in the Greek crisis and the agreement to reach a deal, discussions in local pubs can focus again on the upcoming soccer season and – as today’s Ifo index suggests – companies want to return to business as usual”.
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