ifo survey: German companies are regaining confidence

Companies’ business expectations for the coming months have improved again somewhat for the first time since August 2018. Estimates about the current situation also picked up after the weaker preceding months. That is a good sign that the domestic economy has bounced back again after the weak second half of 2018.

Robust domestic demand in particular is responsible for the shift in sentiment. Business continues to do well in the services sector, supported by a very favourable labour market trend, and the construction sector is still booming.

Headwind from the weaker global economy and international risks is currently impacting the manufacturing industry. The Brexit drama is weighing on sentiment, particularly in Europe. Nonetheless, there are also rays of hope: an easing of the tension in the trade talks between the US and China is likely to have had a positive effect.

Unlike the PMI index, which fell last week, the ifo index (and the ZEW prior to that) confirms our expectations of economic stability in the months ahead. While a recession is still not on the cards, economic indicators are expected to remain volatile in the coming weeks with political risks still dominating the picture.

 

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