The German ifo business confidence index experienced a decline in December, dropping to 84.7 from November’s 85.6, contrary to economists’ predictions of a relatively stable figure, according to survey data released on Tuesday. The current conditions index showed improvement; however, the expectations measure deteriorated.
In their analysis, economists provided insights into the implications of the ifo survey results. Jack Allen-Reynolds from Capital Economics noted that the pessimistic outlook of the ifo survey corresponds with the recent Composite PMI results. Although both indicators suggested significant GDP contractions that ultimately did not occur, their ongoing weakness indicates a limited likelihood of a substantial economic recovery. "We anticipate GDP growth next year, driven by rising real incomes and a more lenient monetary policy boosting consumer spending," Allen-Reynolds commented. "However, with fiscal policy remaining tight and potential growth appearing weak, we project the German economy will expand by less than 0.5% in 2025."
Carsten Brzeski from ING remarked on the ifo survey's findings as another sign of a lackluster year for Germany’s economy, marking a second year of stagnation reminiscent of the early 2000s. "The weak Ifo index reflects growing concerns among German businesses about the country's growth prospects," Brzeski said.
Jorg Kramer of Commerzbank described the unexpected drop in the ifo business climate as "a cold shower." He highlighted that the deep structural challenges in manufacturing are likely to impede the influence of the ECB’s anticipated interest rate reductions on GDP, particularly as we move into the spring. "We only foresee GDP growth reaching 0.2% in 2025," Kramer projected.
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