Germany’s recovery likely to slowdown in 2016

German's February Ifo Business Climate Indicator (BCI) posted a sharp decline, suggesting slow growth of the economy. The headline BCI declined from 107.3 to 105.7, against markets consensus of a drop to 107.0, recording its lowest level since December 2014. However, the businesses' assessment of current conditions came in better as it edged up to 112.9 versus previous 112.5. Expectations declined drastically from 101.6 to 98.8, its lowest level since December 2012.

The sectoral bifurcations showed declines in manufacturing, wholesale and retail sentiment. However, the manufacturing index dropped drastically, reflecting weak global demand and euro's marginal appreciation weighing on the exports.  

"Consumer spending growth slowed too and we expect this trend to continue as the boost from last year's sharp drop in inflation fades" Capital Economics said in a research note. "In all, then, the latest data support our long-held view that the German recovery will slow this year. We expect annual growth of about 1% to follow last year's 1.4%, but a further decline in the survey indicators would pose a downside risk to even our below consensus forecast"