Economists are fairly confident that the German economy will work its way out of the crisis. But the road seems to be longer than expected.
The mood in the German economy did not change overall in May after improving in recent months. The Ifo business climate remained stable at 89.3 points, as the Ifo Institute announced in Munich on Monday. Analysts, however, had expected an increase to an average of 90.4 points. “A cold shower for optimists,” commented ING Bank.
“The German economy is gradually working its way out of the crisis,” said Ifo President Clemens Fuest, explaining the figures. In the previous months, the sentiment barometer had risen three times in a row, which is usually interpreted as an economic turning point. However, Germany’s most important economic leading indicator is still at a comparatively low level.
Thousands of companies surveyed
The approximately 9,000 companies surveyed rated the prospects for their future business better in May, but assessed their current situation more negatively. The business climate brightened in industry, trade and construction, but it became more gloomy in the services sector.
“German companies are becoming more confident again, but only with regard to the future,” noted Andreas Scheuerle, head of industrial countries at Dekabank. “In their view, they will not be able to break out of the long-standing economic weakness in the first half of the year.”
Arguments for recovery remain
“After several positive surprises in the economic data in recent weeks, this is a slight dampener on sentiment,” commented economist Elmar Völker from Landesbank Baden-Württemberg (LBBW). Nevertheless, the global economic situation has stabilized, inflationary pressure is gradually easing and the European Central Bank (ECB) is about to cut interest rates. All of these are arguments for a recovery in the German economy over the course of the year. Völker said: “But the trees don’t grow to the sky.”
The experts at Landesbank Hessen-Thüringen were also surprised by the stagnation. Other leading indicators have recently risen, they say, with a view to the purchasing managers’ indices from S&P Global or the ZEW economic expectations. Economic development appears to be improving only hesitantly, explained analyst Ulrich Wortberg.
Source: Stern
