‘German economy has reached cruising altitude; biz is buoyant’

The German economy, Europe’s biggest, appears to have reached cruising altitude as business confidence maintained its current high level in May, the Ifo economic institute said on Friday. The Ifo institute’s closely watched business climate index eased slightly to 108.5 points this month from 108.6 points in April, the think tank said in a statement. 

It was the first time since September that the index has fallen, but analysts had been expecting a slightly bigger drop. Hence, Ifo president Hans-Werner Sinn insisted that the development was no cause for concern. “Companies were once again more satisfied with their current business <g data-gr-id="26">situation,</g> but expressed slightly less optimism about the months ahead. The German economy remains on track,” he said. 

Ifo calculates its headline index on the basis of companies’ assessments of the current business environment and the outlook for the next six months. The sub-index measuring current business rose to 114.3 points, the highest level since June <g data-gr-id="25">2014,</g> while the outlook sub-index slipped by 0.4 <g data-gr-id="24">point</g> to 103.0 points, the institute said. Analysts generally viewed the data as positive. “Germany has reached cruising altitude,” said Berenberg Bank economist Christian Schulz. 

“Overall, the Ifo index signals solid growth in the eurozone’s largest economy, but also that after the rally in confidence indicators since the autumn 2014, the room for further improvement is now limited,” he said. Some of the tailwinds to recovery -- such as cheap oil and the weaker euro -- were “blowing a bit less strongly,” he said.