German business climate index misses forecasts, falls unexpectedly in Jan

German economy made a less confident start to 2017. The Munich-based Ifo economic institute said German business climate index fell to 109.8 in January from 111.0 in the previous month. The January reading missed Reuters consensus forecasts for a value of 111.3.

Corpoartes seemed satisfied with the current business situation,  but are less optimistic about their six-month business outlook. A slight improvement was seen in current conditions indicator, which rose to 116.9 from previous month's 116.7, although marginally missing expectations.

Manufacturing sector index fell, with dip in several key branches of German manufacturing. Capacity utilisation rose by 0.3 percentage points to 86.0 percent and more manufacturers expect price increases. In wholesaling, the business climate cooled down after hitting a temporary high last month.

After hitting record highs in recent months, the business climate in the construction sector cooled down. Although contractors are less optimistic about the months ahead, the current business situation index nevertheless hit a new high this month.

"The resilience of the current assessment index in recent months suggests that German economic growth is likely to have accelerated in Q4, perhaps by as much as 0.5%q/q, and that the pace of growth probably continued at the start of 2017." said Lloyds bank in a report.