Today’s Ifo index ends a period of pessimism and suggests that not all is bad in the German economy. With some (technical) rebounds in industrial production in February and March, the first quarter for the German economy might not be as weak as some have expected.
In our view, the solid domestic fundamentals, low-interest rates and a weak euro, still argue in favour of a rebound, mainly on the back of investments, consumption and some relief from the global risk factors. At the same time, however, the risk of a self-enhancing negative sentiment loop is increasing by the month.
