German business confidence slips in May but beats forecasts; 1Q GDP growth confirmed at 0.3%
The German Ifo business climate index nudged down to 108.5 in May from 108.6 in April, marking its first drop since October last year, but still a touch ahead of analysts’ expectations for a reading of 108.3.
Ifo’s measure of current conditions rose to 114.3 in May from a revised 114 in April.
“Overall, the Ifo index signals solid growth in the Eurozone’s largest economy, but also that after the rally in confidence indicators since the autumn 2014, the room for further improvement is now limited, especially with some of the tailwinds such as cheap oil and the weaker euro blowing a bit less strongly. Germany has reached cruising altitude,” said Christian Schulz, senior economist at Berenberg.
Earlier, data showed gross domestic product in Germany rose 0.3% quarter-on-quarter and 1.1% on the year in the first quarter, confirming a preliminary estimate published last week.
"In the short run, the fundamentals are sound enough to see another acceleration of the German economy," said Carsten Brzeski, chief econonmist at ING. “This is also reflected in today’s increase in the Ifo’s current assessment component. As orders at hand have increased again and inventories have dropped, industrial production should support growth in the coming months."
"Moreover, and probably even more important, the strong labour market, higher wages and low interest rates should further drive consumption and the construction sector. Finally, the weaker euro should continue to boost German exports," added Brzeski.