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IFO Improvement Looks More Broad-Based Than Composite PMI

GERMAN DATA
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Germany's IFO Business Confidence Index rose to 87.8 in March, higher than both consensus (86.0) and February's value (85.7, revised up from 85.5), and the highest since June 2023. This mirrors March's flash Composite PMI directionally, but the uptick was broad-based in the IFO whereas the flash PMI saw the manufacturing sector deteriorating further. Notably, business expectations improved in both surveys.

  • Both the Current Assessment and the Expectations readings came in higher than in February and than expected, at 88.1 and 87.5, respectively (vs 86.9 and 84.4 priors).
  • March's increase was broad-based, with all of the manufacturing, services, trade, and construction sectors printing higher than in the month prior. Specifically, the manufacturing diffusion balance came in at -10.0 (the highest since last June, vs -17.1 prior), services at 0.3 (vs -4.0 prior), trade at -22.0 (vs -30.8 prior), and construction at -33.5 (vs -35.4 prior).
  • March's Germany flash PMI also increased on the composite level but but was only driven by an uptick in the services sector (composite 47.4 vs 47.0 cons and 46.3 prior; services 49.8 vs 48.8 cons and 48.3 prior). In the manufacturing sector, the PMI decreased for the second consecutive month, coming in at 41.6 (vs 43.0 cons; 42.5 prior), and has now pared about half of its gains since its recent low in July 2023. However, business expectations saw an improvement also in the PMI data, coming in higher for the sixth consecutive time.
  • Looking at the less volatile 3MMA measure, the previous broad downtrend in IFO was broken in March - all sectors printed higher than last month. The uptick was most notable in the manufacturing sector.
  • Overall, the data provide another sign that economic conditions in Germany appear to be bottoming out. Industrial production is bouncing back according to the most recent print in January, though some other data leaves the overall picture ambiguous: headline and "core" factory orders for example remain in a lengthy downtrend.
  • MNI's compilation of analyst estimates for German real GDP growth this quarter is looking weak after downward revisions in recent months, now standing at -0.3% Y/Y. For the rest of the year, analysts see a gradual recovery for the German economy, with yearly growth in the consecutive quarters currently estimated at -0.3%, 0%, and 0.6%.

MNI, Destatis

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Germany's IFO Business Confidence Index rose to 87.8 in March, higher than both consensus (86.0) and February's value (85.7, revised up from 85.5), and the highest since June 2023. This mirrors March's flash Composite PMI directionally, but the uptick was broad-based in the IFO whereas the flash PMI saw the manufacturing sector deteriorating further. Notably, business expectations improved in both surveys.

  • Both the Current Assessment and the Expectations readings came in higher than in February and than expected, at 88.1 and 87.5, respectively (vs 86.9 and 84.4 priors).
  • March's increase was broad-based, with all of the manufacturing, services, trade, and construction sectors printing higher than in the month prior. Specifically, the manufacturing diffusion balance came in at -10.0 (the highest since last June, vs -17.1 prior), services at 0.3 (vs -4.0 prior), trade at -22.0 (vs -30.8 prior), and construction at -33.5 (vs -35.4 prior).
  • March's Germany flash PMI also increased on the composite level but but was only driven by an uptick in the services sector (composite 47.4 vs 47.0 cons and 46.3 prior; services 49.8 vs 48.8 cons and 48.3 prior). In the manufacturing sector, the PMI decreased for the second consecutive month, coming in at 41.6 (vs 43.0 cons; 42.5 prior), and has now pared about half of its gains since its recent low in July 2023. However, business expectations saw an improvement also in the PMI data, coming in higher for the sixth consecutive time.
  • Looking at the less volatile 3MMA measure, the previous broad downtrend in IFO was broken in March - all sectors printed higher than last month. The uptick was most notable in the manufacturing sector.
  • Overall, the data provide another sign that economic conditions in Germany appear to be bottoming out. Industrial production is bouncing back according to the most recent print in January, though some other data leaves the overall picture ambiguous: headline and "core" factory orders for example remain in a lengthy downtrend.
  • MNI's compilation of analyst estimates for German real GDP growth this quarter is looking weak after downward revisions in recent months, now standing at -0.3% Y/Y. For the rest of the year, analysts see a gradual recovery for the German economy, with yearly growth in the consecutive quarters currently estimated at -0.3%, 0%, and 0.6%.

MNI, Destatis