Ifo business climate for German economy falls strongly in February

The Ifo business climate for German economy dropped surprisingly in February despite the slump in January. The index dropped strongly to 98.5 in the month from January’s 99.3, as compared with consensus expectations of a fall to 98.9. The fall was mainly because of the assessment of the current business situation. Expectations dropped further, although they had dropped in the prior month.

In climatic terms, February was mild, but it continued to be frosty on the executive floors. The Ifo business climate is still in free fall. It is concerning that the business climate for the service sector is no longer moving sideways, but has fallen considerably in recent months. This raises doubts regarding the domestic demand as a rock in the surf, noted Commerzbank in a research report. The fall in the Ifo business climate, as well as the fall in incoming orders, is now pronounced as it was just before several recessions in the past forty years. There is a slight rise in the possibility of a recession.

After the German economic growth stagnated in the fourth quarter, only special factors show a return to growth in the final quarter. Since the start of December, the Rhine has been carrying enough water again, so that the chemical industry in particular can again be supplied with intermediate products without any issues.

“In addition, an increase in incoming orders suggests that car production will at least recover somewhat in the first quarter although this industry does not only suffer from WLTP related problems. Our 2019 growth forecast of 1.2 percent is still associated with significant downside risks”, added Commerzbank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -31.9488, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 119.121 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex