German Business Sentiment Drops On Crimea But Hopeful on Economy

German business sentiment dipped slightly in March, failing to meet analysts’ expectations, according to the latest data from Germany’s Ifo Institute for Economic Research.

The Ifo business climate is a widely observed early indicator for economic development in Germany, the euro zone’s largest economy. The March data, released on Tuesday morning, showed a fall to 110.7, failing to meet analysts’ predictions in a Reuters poll for a reading of 111.0. In February, the Ifo index had come in at 111.3.

Other data collected by the institution showed that German forward-looking business expectations fell to 106.4 in March, below the 108.3 recorded in February and again failing to meet expectations from analysts polled by Reuters.

These two disappointing headline figures were due to the fallout from events in Crimea, according to Carsten Brzeski, a senior economist at ING based in Brussels, with German industry reliant on energy pipelines from Russia.

Nonetheless, Brzeski pointed to the current assessment component of the index – which rose to 115.2 versus 114.4 last month – as evidence of a continued impressive upward trend, reaching the highest level since April 2012.

“German businesses are impressed but not shocked by the possible economic impact from the Crimean crisis,” he said in a research note after the release. “The German economy is gaining momentum.”

“The exceptionally mild weather has given an enormous boost to construction activity…in addition, the well-known growth drivers like the strong labor market, low inventories and filled order books are also doing their work.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza