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German Ifo Data Disappoints

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The Munich based Center for Economic Studies and CESIfo have just published Germany’s important and very tradable Ifo figures. These numbers come in three parts relating to the Business Climate, Current Assessment and Expectations.

The Ifo Current Assessment number for March is 115.2, a little higher than the previous 114.4 and also beating the consensus estimate of 114.6.

The Ifo Business Climate figure was 110.7 against a previous of 111.3 and an expectation of 111.0.

Finally, the Ifo Expectations reading is 106.4, down on the February number of 108.3 and the anticipated number of 107.6.

These Ifo numbers are comprehensively calculated from interviews with over 7,000 businesses in Germany and as such tend to be a strong indicator of the underlying business sentiment as well as the level of optimism around the short to medium term climate.

The story contained in today’s numbers is that German businesses are displaying confidence around the current trading environment but are taking a cautious approach to the future as evidenced by the conservative Expectations component.

The cautious optimism around the future business environment is a natural reflection of the fragile state of these early stages of the Eurozone recovery. Germany itself is in a solid position however there is concern among indigenous industry around two elements.

Firstly, the situation in the Ukraine affects Germany more than any other European nation. Germany predominantly imports its energy from Russia and even though there are above average stockpiles of Natural Gas in Germany, it’s move away from Nuclear power will increase demands on this energy resource. The situation is far from critical but nonetheless is weighing somewhat on German business confidence.

Secondly, the strength of the Euro is putting pressure on this exporting nation, this is offset to a degree by the pick up in global demand and the fact that much of Germany’s exports are contained within the Eurozone, however the rise of the single currency is dampening business outlook.

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