German business confidence deteriorates in April - Ifo
German business confidence deteriorated in April, according to a widely-followed survey released on Tuesday.
The Ifo business climate index fell to 102.1 from 103.3 in March, missing expectations for a reading of 102.7.
Meanwhile, the current assessment index slipped to 105.7 in April from 106.6 the month before, falling short of expectations for a reading of 106.0 and the expectations index declined to 98.7 from 100.0, compared with a forecast of 99.5.
The index for manufacturing printed at 24.0 versus 27.3 in March, while the construction index rose to 19.8 from 18.3. The service sector index fell to 25.9 from 29.4 in March and the trade index came in at 10.2 in April versus 14.0 in March.
Clemens Fuest, president of the Ifo Institute, said: "High spirits among German businesses have evaporated.
"The German economy is slowing down."
Jennifer McKeown, chief European economist at Capital Economics, said: "April’s disappointing Ifo survey adds to signs that the German economy is slowing, but not as sharply as recent hard data had implied.
"Note that there have been methodological changes to the survey this month, which in theory should make it a better guide to German GDP growth. The Ifo has published a back-run of the new headline indicator from 2005 and, based on its past strong relationship with annual GDP growth, it points to a moderate slowdown from Q4’s 2.9% to around 2.2%.
"This is still a strong pace of growth, well above Germany’s long-run potential. The survey suggests that the very weak tone of the hard data for early 2018, which we think was distorted by temporary factors including the weather, should not continue into the second quarter."
Berenberg economist Florian Hense said: "The decline for the fifth consecutive month echoes the slew of recently subdued data and suggests the German economy lost some momentum in early 2018. While the data has turned soft across the eurozone, the sword of protectionism is hanging particularly close over the trade-reliant German economy.
"We expect a near-term dent to German GDP growth in Q1 (0.5% after 0.7% on average in 2017). But, from summer onwards, sentiment is likely to level off (yesterday’s steady PMI pointed already in that direction) and the economy is likely to rebound (0.6% qoq from Q2 onwards) as the simmering trade tensions look set to be resolved over the next weeks."
Tuesday's release is the first since the Ifo's methodology was revamped, with the business confidence index expanded to include a services gauge, which was previously published separately. Meanwhile, the manufacturing weighting has been cut to 30% from 60%. In addition, the base year has been changed to 2015 from 2005.