German Ifo business climate index rises in January, economy likely to have expanded strongly in Q4

The German Ifo business climate for industry and trade rose unexpectedly in January. The index rose from 117.2 to 117.6, coming in above consensus expectations of 117. This is the highest since mid-1969. During that time, the German economy was performing so well that the jobless rate was below 1 percent and there were wild strikes, noted Commerzbank in a research report.

According to skeptics, business might have lowered their expectations for the coming six months slightly for the second time in a row. However, at most, this signals a slight slowdown of a rapid growth rate, not a real economic downturn. Inflation currently, unlike in the 1970s and 1980s, is more and more of a global phenomenon due to international value-added chains.

In the past few years, wage growth has not accelerated in Germany despite the tightening labor market. Even if wages rise at a slightly sharper rate after the tough round of negotiations in the German metal industry, there is no sign of this in the remainder of the euro area. According to Commerzbank, the ECB would possibly not end its very loose monetary policy soon; instead it might continue to boost the German economy.

“The high level of the Ifo business climate signals that the German economy should grow strongly again in the first quarter (Forecast: 0.6 percent on Q4). We expect a plus of 2.5 percent for the full year in 2018”, added Commerzbank.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral 11.3084, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 25.3226. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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