German Ifo data slumps

BERLIN (Mar 25)  It seems the Russia/Ukraine conflict has had its effect on the German economy as Ifo expectations dropped to the lowest level since the start of the COVID-19 pandemic. The Ifo data is a leading indicator and all three readings (see below) printed below previous readings. Against analyst expectations, only the current assessment beat expectations.

In terms of what this could mean for the outlook of the German economy, ING noted "More precisely for the German economy, the risk of another contraction in the first quarter of the year and hence a technical recession is high. For the entire year, we have revised downwards our growth forecast to 1.6%, which would delay the return of the economy to pre-pandemic levels to the end of this year."

In an initial reaction to the data, both the Dax and EUR/USD fell following the news. After hitting a high of 1.1037 prior to the data the price of EUR/USD fell to reach 1.0990 after the data hit the markets. The German Dax index had been lower for much of the session prior to the Ifo release but post data the price fell 55 points before recovering.

German Ifo Business Climate Index (Mar) 90.8 vs exp 94.2 prev 98.5

German Business Expectations (Mar) 85.1 vs exp 92.0 prev 98.4

German Current Assessment (Mar) 97.0 vs exp 96.5 prev 98.6.

REUTERS