German Ifo Business Sentiment At Record High; GDP Growth Improves
23 May 2017 - 6:38PM
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A record high business sentiment, a one-year high economic
growth and a six-year high growth in the private sector signal
strong positive momentum of the German economy, the biggest in the
euro area.
As companies were upbeat about their future amid the improving
current situation, the business sentiment index strengthened to a
record high 114.6 from a revised 113.0 in April, the Munich-based
Ifo institute reported Tuesday.
Ifo business confidence score reached its highest level on
record since 1991. The reading was expected to rise marginally to
113.1 from April's initial estimate of 112.9.
The largest euro area economy expanded 0.6 percent in the first
quarter, the most in a year on spending, investment and exports, a
detailed report from Destatis confirmed earlier in the day.
Elsewhere, the purchasing managers' survey suggested that the
German private sector grew at the sharpest rate in over six years
in May, driven by manufacturing activity.
Today's strong German data add to the evidence that, not only
the German economy, but the entire Eurozone economy could become
the positive growth surprise of 2017, Carsten Brzeski, an ING DiBa
economist, said.
The development in the business confidence index combined with
other key economic indicators, points to economic growth of 0.6
percent in the second quarter, Ifo said. Economic activity in
Germany remains very brisk, the think tank added.
The Ifo current conditions indicator came in at 123.2, up from
121.4 in April. This was also above the forecast of 121.0.
Likewise, the expectations index improved to 106.5 in May from
105.2 in April. Economists had forecast the index to rise
moderately to 105.4.
Aided by the European Central Bank's relaxed monetary policy
stance and a recovery in Western Europe, the German economy is
going full steam ahead, Joerg Kraemer, a Commerzbank economist,
said. For 2017 overall, the economist still expects 1.6 percent
growth.
In its monthly report released on Monday, the Bundesbank said
that the growth is set to continue in the spring.
According to Destatis data, GDP growth accelerated from 0.4
percent expansion seen in the fourth quarter.
On a yearly basis, the calendar-adjusted growth eased slightly
to 1.7 percent from 1.8 percent a quarter ago. Annual growth figure
also matched the provisional estimate published on May 12.
The expenditure-side breakdown of GDP revealed that household
spending grew 0.3 percent, slightly faster than the 0.2 percent
expansion a quarter ago. Likewise, growth in government spending
improved to 0.4 percent from 0.3 percent.
Gross capital formation declined 0.5 percent, in contrast to the
2.5 percent growth in the fourth quarter.
Exports advanced 1.3 percent, but slower than the 1.7 percent
expansion in the previous quarter. Similarly, imports climbed only
0.4 percent after rising 2.5 percent.
PMI survey showed that the pace of private sector expansion
accelerated for the third time in four months to a 73-month record
in May, reflecting the sharpest increase in manufacturing output
since April 2011, IHS Markit said.
The composite output index rose unexpectedly to a 73-month high
of 57.3 in May from 56.7 in April. The expected reading was
56.6.
The flash manufacturing PMI climbed to 59.4, while it was
forecast to drop to 58.0 from 58.2 in April. The indicator signaled
the strongest performance since April 2011.
On the other hand, the services PMI declined to 55.2 in May from
55.4 in April. Economists had forecast the indicator to rise
marginally to 55.5.
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