Germany: Signs of economic recovery growing stronger
According to the April Ifo test, business expectations have now improved for the fourth straight month. Even more surprising is the fact that the steep slide in the assessment of current business conditions has evidently come to a halt, with an increase of nearly one point. Experience shows that the assessment of business conditions tends to be more of a lagging indicator.
The pronounced recovery in business expectations in the manufacturing sector, the sector hit hardest by the crisis, is especially encouraging. Business expectations are meanwhile heading up almost as steeply as they had trended down last autumn. This is a clear argument against a prolonged recession. It also runs counter to the assumption by the research institutes in their latest report that the German economy will not stabilize before mid-2010.
In spite of these hopeful signs from the Ifo survey, it should of course not be overlooked that the economy was in extremely poor shape in the first few months of this year. In seasonally-adjusted terms, the German economy is likely to have contracted even more strongly in the first quarter 2009 than in the fourth quarter 2008 (-2.1%), with the still outstanding production and sales data for March of this year unlikely to alter the picture much. According to our estimates, gross domestic product in the first quarter 2009 was around 6% down on a year earlier. But this does not mean that the average figure for 2009 as a whole will be the same.
Dr. Rolf Schneider
Tel.: 49 / 69 / 2 63 – 5 77 90
e-mail: rolf.schneider@allianz.com
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