German business confidence rebounds in March

German business confidence rebounds in March

In March, German business confidence bounced off more than anticipated, in a shocking contrast to the downbeat business polls, which rattled the world’s markets on Friday.

However, it confirmed the dismal sentiment in Germany’s major manufacturing sector, and also noted that any improvement in sentiment was mostly because of domestic-focused sectors, in particular, construction and retail.

As the Munich-based Ifo economic institute informed, its business climate index managed to rally from 98.5 to 99.6 last month. By the way, February’s outcome had appeared to be the lowest reading since November 2014.

The outcome surpassed experts’ expectations for 98.7 and also was the first improvement for seven months. As for the subindexes for expectations as well as current business conditions, they improved.

The German economy is actually demonstrating resilience.

Germany, which appears to be the world's number two exporter, is actually exposed to a downturn in the world’s demand, not least through the risks of a trade clash between China and America, Britain’s departure from the EU as well as threats of higher levies on German-made cars from the American leader.

In view of decreasing demand, businesses are hardly planning any hikes in output. On the contrary, conditions in wholesale and retail trade improved to their best since May last year.

Last Friday’s data revealed that activity in Germany’s manufacturing sector shrank at its steepest tempo for almost six years in March, and hard data on output as well as orders for January also fell short of expectations. According to Ifo's poll, responses from manufacturers kept deteriorating, with expectations diving to their lowest value since November 2012.

In general, the German economy has been speeding down for the fourth quarter.

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Market updates on August 15

The risk sentiment remains under pressure after the comments by China about the countermeasures against the US tariffs. Thus, the AUD/USD and the USD/JPY pairs will be under our attention.

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