It would have been really surprising if Ifo expectations had not fallen in March given events in Crimea, tensions with Russia and weaker numbers in several emerging economies. This was the second fall in a row, three commonly define a new trend. There will therefore be much focus on the April numbers. Expectations tend to lead the assessment of the current situations by a few months.
The increase in the assessment of the current situation points to strong growth in Q1, possible very strong growth. We currently pencil in 0.6% q/q with the main risk being to the upside. We have seen that before: An accumulation of special factors – like inventories and weather – can occasionally lead to exceptionally high growth like in Q2 2010 (+2% q/q) or in Q1 2011 (+1.5% q/q). The following quarter then usually comes in much weaker. That’s actually what the Bundesbank expects according to the monthly report published yesterday. A strong Q1 and a considerably weaker Q2.
The underlying trend of the German economy is solid. A marked slowdown in emerging markets constitutes a significant risk. However, the recovery of troubled countries in the Euro area is very good news for German companies. We expect GDP growth of 1.8% this year and 2% next year.
Nordea