IFO German business climate stirs optimism to minimize the risk of recession in the largest European Economy

IFO German business climate stirs optimism to minimize the risk of recession in the largest European Economy

  • IFO German business climate stirs optimism to minimize the risk of recession in the largest European Economy.
  • IFO German business climate prints at 96.1 in February versus 95.3 expected.
  • IFO says Monday's data doesn't fully reflect the potential impact of Coronavirus on the German economy.

IFO Institute for Economic Research released its report on the German business climate in February on Monday. Printing better than expected, the German business climate index helped minimize the risk of recession in the largest European economy. The data also suggested marginal improvement in the German manufacturing sector that was previously under pressure due to the declining exports.

IFO German Business Climate Prints At 96.1 In February

The index was revealed at 96.1 on Monday. Following an upward revision for January’s reading, it was announced at 96.0 for last month. In an estimate announced earlier, analysts had expected the index to see a drop to 95.3 in February.

IFO President Clemens Fuest commented on Monday’s data and accentuated that the German economy remained unaffected of the complications ascribed to the recent outbreak of Coronavirus in China. Economic growth in the first quarter in Germany was noted at 0.2%.

The institute, however, expressed concerns that Monday’s data may have failed to completely reflect the impact of the health emergency on the German economy. In an event that it shapes into a pandemic, the upcoming months could potentially post a much harder hit to the economy. The virus has so far killed around 2,500 people in mainland China while 29 different countries have announced confirmed cases of Coronavirus, as of Monday.

In the fourth quarter, private consumption remained weighed and state spending weakened to fuel the debate of a higher risk of recession in Germany. Economist Klaus Wohlrabe of IFO also echoed the same opinion that it is currently hard to precisely gauge the impact of the Coronavirus crisis on the German economy. With the virus slowly turning into a pandemic, the German economy that relies heavily on its exports may face excessive pressure.

German Manufacturing Morale Gained For The 3rd Straight Months

IFO sub-index that is primarily focused on measuring the German manufacturing morale recorded an increase for the 3rd month straight, all thanks to an upbeat outlook on orders. Monday’s data suggested that the German manufacturing sector that has remained downbeat in the past few months is slowly starting to climb out of the ditch.

December’s data on German industrial output released earlier this month marked its worst reading since 2009 (recession hit year) that gave a clearer picture of the weakening manufacturing sector in Germany.

While the EUR/USD currency pair initially declined to 1.0804 on Monday, it caught steam later on and climbed back to the 1.0863 level.

By Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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