German Ifo business climate index rises in May, economy likely to expand strongly in Q2

The Ifo business climate for Germany has surprised on the upside in May, coming to the highest level seen since German unification. The Ifo business index rose to 114.6 from 113, as compared with consensus expectations of the index reaching 113.1. Both components added to the rise. The manufacturing and services PMI for the euro area managed to remain at the high April level of 56.8.

Everything indicates towards the German economy growing well in the June quarter. According to a Commerzbank research report, the economy is expected to grow 0.5 percent quarter-on-quarter. The exceptionally mild weather worked in favour for the construction industry, which added 0.2 percentage points to the result.

Helped by the ECB’s relaxed monetary policy stance and a rebound in Western Europe, the German economy is expanding strongly, stated Commerzbank. For the whole of 2017, the economy is expected to grow 1.6 percent. For the euro area, the economy is expected to expand 0.5 percent this year.