May MNI analysts survey Apr Mar
median range
————————————————————————
Business sentiment: 114.2 113.8 113.3 – 114.2 114.2 115.0
Current conditions 121.4 121.0 120.6 – 121.7 121.0 121.0
Six-month outlook: 107.4 105.6 105.0 – 106.0 107.7 109.2
—

FRANKFURT (MNI) – Optimism among German firms stabilized in May
after two months of declines, as a further deterioration in respondents’
view of the short-term outlook offset a rise in the current situation.
the Ifo institute reported on Tuesday.

As a result, the business climate indicator was unchanged at 114.2
in May. Forecasts had generally called for a further decline in business
sentiment, with only the most optimistic projections pointing to a
stable figure.

After a brief pause in April, current conditions were once again
viewed more optimistically, lifting the sub-index to 121.4, its highest
level on record.

“The previously good business situation has again been given a
better assessment,” Ifo said in a press release.

The six-month outlook fell for the third consecutive month,
reaching an 11-month low of 107.4.

While the expectations continued to lose ground, the outlook
“remains positive,” the institute added. “The business cycle traffic
lights still signal ‘green’.”

The stable business morale comes despite a downward trend in the
ZEW indicator, which reflected respondents’ view that a further
acceleration in Germany’s economic recovery was unlikely.

The German economy grew 1.5% on the quarter in 1Q, beating all
expectations. “It came as a surprise that the German economy recovered
from the crisis that quickly,” ZEW President Wolfgang Franz said.
However, “this strong dynamic is not going to remain undamped.”

Supporting this assessment, the May purchasing managers index
showed manufacturing output expanding at its slowest pace in seven
months. New business growth also decelerated.

The Bundesbank said that while Germany’s “economic advance is
unmistakable”, the “catch-up effects” that led to the strong jump in 1Q
“considerably overstate the underlying economic momentum.”

“Growth is likely to ease somewhat in the foreseeable future
following the explosive start to 2011,” the central bank predicted last
week.

The International Monetary Fund expects average GDP growth to slow
to 2.5% this year and to 2.1% in 2012.

The German Industry Association (BDI) also foresees economic growth
slowing to +2.5% this year. Taking into account the 1.2% statistical
carryover from last year, “this doesn’t suggest an overly dynamic
development in the course of the year,” the association said.

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— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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