Ifo Survey Beats Expectations, Signals Stronger Outlooks in March

GERMANY MAR IFO BUSINESS CLIMATE 93.3 (FCST 91.0); FEB 91.1

GERMANY MAR IFO CURRENT COND 95.4 (FCST 94.1); FEB 93.9

GERMANY MAR IFO EXPECTATIONS 91.2 (FCST 88.3); FEB 88.4r

• The German Ifo survey recorded a fifth month of improvement for the German economy in March. The headline index rose 2.2 points and expectations by 2.8 points, likely boosted by cooling energy costs and less weak global demand outlooks.
• March Ifo improvements materialised despite volatility in the international banking sector in recent weeks, which largely underpinned consensus looking for only a marginal current conditions uptick overall. After the slide in the March ZEW survey of financial market experts, the stronger Ifo survey implies that recent volatility has not notably spilled over to the real economy for now.
• Manufacturing sentiment was substantially stronger, brightening notably in key areas such as auto, chemicals, electronics and machinery.
• Services sentiment rose to the highest since February 2022, whilst trade increased only slightly. Retail outlooks stalled, remaining pessimistic as consumer demand remains muted.
• The Ifo Spring Economic Forecast from March 15 projects a Q1 -0.2% q/q contraction due to economic headwinds of persistently high inflation and rising borrowing costs, implying that the German economy still remains unlikely to escape a winter recession.