NEWS / Foreign Exchange

Germany: Ifo Index, April

The Ifo-Index rose to 108.6 and surprised positively again. The market had only expected a slight increase from 107.7 to 107.9 The current level nearly reached the high of December 2006, and this time the the expectation component (104.3 after 103.2) and the current assessment component (113.2 after 112.4) are moving in accordance.

The strongest improvement was reported for the retail sector, followed by the wholesale sector and manufacturing. In the construction sector sentiment decreased slightly. The business indicator for the service sector, which is not part of the Ifo-Index but released at the same time by the Ifo-Insitute, saw a strong improvement from 24.5 to 28.5. According to representatives of the Ifo the German economy is in a very good position and another good year, maybe two might be expected. Neither the strong euro nor a further weakening of the US economy should be able to seriously harm growth in Germany.

Assessment: There seems to be no more doubt that the German economy entered into a strong and sustainable upswing. Although this insight could have been reached some weeks ago already, now the last skeptics should be convinced. The bond market reacted with a slight increase in yields and the euro posted marginal gains.

This data could have weighted stronger on bonds and the USD but this week a consolidation seems to take place and the positive influence from the US bond markets is an additional factor. Over the medium term these numbers confirm our expectations of a further increase in yields.