German German German

German IFO : Positive momentum, little impact from the Russo-Ukrainian crisis so far

Macro
CD
Christopher Dembik

Head of Macro Analysis

Summary:  The German IFO for February continues to move upward. This confirms the momentum for the German economy is improving in Q1. The potential economic impact from the Russo-Ukrainian crisis is likely to remain limited, at least in the short term.


Improving outlook: Sentiment in the German economy has improved noticeably in February. After a positive reading in January (96.0), the Ifo Business Climate Index rose to 98.9 this month (see – Chart 1). Companies are betting on an end to the coronavirus crisis. The uptick continues to be driven by the expectations for the next six months – which jumped to 99.2 in February from 95.8 in January. Recent surveys have confirmed the positive momentum of the German economy – think the German preliminary PMI for February for instance. The German economy is still operating below its potential. But the stage is set for an improving outlook over the course of Q1, and perhaps over Q2. Household balance are strong and companies are satisfied both with the current situation and the expectations.

Upturn across key sectors: The business climate in manufacturing rose to 23.5 in February from 20.0 in January (see – Chart 2). In this sector, both the current conditions as well as the expectations component improved. However, manufacturing is still exposed to supply shortages and dislocations in international shipping, with material shortage hampering production. Business climate in construction also improved, from 8.0 to 8.3. Construction was never hit that hard by the pandemic and was operating close to capacity during most of the recent period. Finally, the business climate for both the services and trade increased too (to 13.5 in February from 7.7 in January and to 6.6 from -1.3, respectively). The strong rebound in the services sector is explained by the end of most COVID restrictions in February (see- Chart 3).

Little to no impact from the Russo-Ukrainian crisis: The February poll was filed before the intensification of the Russo-Ukrainian crisis, especially before reports emerged of Russian troops rolling into eastern Ukraine. The latest events will undoubtedly increase uncertainty in the short-term. But the economic impact on Germany is likely to be limited, unless the EU commits to tough and widespread sanctions against Russia’s energy sector, for instance. This is unlikely at that stage. Several major EU members (Austria, Italy and Germany) are favoring a targeted approach with less negative economic implications for the EU.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.