German economy to continue "flirtation" with stagflation - ING

(Alliance News) - Sentiment among German businesses picked up this month, according to numbers on Monday, though fears for the outlook for Europe's largest economy remain.

According to the ifo, sentiment among German businesses has improved slightly in April. The Business Climate index rose to 93.6 points from 93.2 in March.

"This was due to companies' improved expectations. However, companies assessed their current situation as a little worse. German business's worries are abating, but the economy is still lacking dynamism," ifo said.

The current situation index edged lower to 94.0 from 94.2, while the expectations index rose to 88.2 from 86.2.

Dutch bank ING noted the fall in the less forward-looking current situation index.

"An improving Ifo index is always good news. However, a weaker current assessment component and below-average expectations do little to take away the stagnation risk for this year," ING added.

ING expects the German economy to continue "flirting" with a recession.

"With seven monthly increases in a row, today's Ifo index is another illustration of the German economy's better-than-expected resilience. The drop in wholesale energy prices and the reopening of China have even fuelled a short-lived industrial renaissance. Chances are even high that the first estimate for first quarter GDP growth (to be released on Friday) will show a positive growth figure. However, we expect this rebound to run out of steam soon. The flirtation with stagnation will continue," ING added.

The German economy is expected to have grown 0.2% quarter-on-quarter in the first three months of the year, according to FXStreet cited consensus, after sliding 0.4% in the final quarter of 2022.

By Eric Cunha, Alliance News news editor

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