Germany’s Ifo Business Climate Index rose from 106.7 points in April to 107.7 points in May. The current conditions and business expectations indices were higher than the market projections. Combined with the stronger PMI numbers, the Ifo provides an upbeat picture of the economic development of Germany. Meanwhile, the business expectations level continues to be low. This indicates that the economic growth is expected to have decelerated after the very robust first quarter, said Nordea Bank in a research report.
“We thus keep our call of 0.3% GDP growth in the second quarter of 2016 unchanged. Our view is further confirmed by the ZEW expectations index which weakened slightly”, added Nordea Bank.
The detailed GDP statistics affirmed the analysis that Germany’s robust growth of 0.7% q/q in Q1 was broad-based, noted Nordea Bank. Exports, which grew 1% q/q contributed the most to t he economic growth. It contributed 0.5 percentage points. But the rise in import was stronger, growing 1.4% q/q, making the net exports’ contribution slightly negative. However, this is not enough to bring the large trade surplus down that rose in euro terms in Q1.
Within the domestic components, investments and construction into machinery and equipment rose at the most rapid rate. The rapid rise in construction was partially because of mild weather, but the growth in fixed asset investments into equipment and machinery is believed to be more sustainable. In the recent years, machinery investments have been quite low; hence there should be space for growth to accelerate, according to Nordea Bank.
Meanwhile, consumer consumption has continued to rise at a stable rate of 0.4% q/q. Solid income growth has underpinned household consumption, contributing 0.2 percentage points to the economic growth. Government expenditure growth decelerated to 0.5%.
The material has been provided by InstaForex Company – www.instaforex.com