German Ifo business climate index unchanged in May, economic growth likely to slowdown

The German Ifo business climate remained the same in May following five straight falls. However, this is not expected to hint at a turnaround. The Ifo business climate and other leading indicators continue to point downwards, noted Commerzbank in a research report. The Ifo business climate index stayed at 102.2 in May, the same as in April. The economists surveyed had anticipated a slight fall. The first component of the business climate, the assessment of the current situation, rose a bit from 105.8 to 106 while expectations for the coming six months dropped a bit to 98.5.

The trend of Ifo index is clearly downwards. Moreover, the purchasing managers’ index for the nation’s manufacturing sector continued to decline in May. Also there are good fundamental reasons for a longer deceleration in the German economic growth. On a year-on-year basis, the euro appreciated to 9 percent against the currencies of its most significant trading partners. In the past, this has usually triggered interim downturns. The dampening effect of the appreciation is already seen in declining orders from outside the euro area. Moreover, the oil price has increased considerably, which should lower the disposable income of German citizens by 0.7 percent if the oil price continued to be at its current level until the end of the year.

Given the seven interim downturns since the early 1970s, economic growth is expected to decelerate for 12 months, stated Commerzbank. German economy is expected to expand 2 percent in the whole of 2018, added Commerzbank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -152.39, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 70.8942. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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