Why Economists Said Ifo Survey Signals Modest Growth For Germany Next Year

(RTTNews) - Survey data released on Tuesday showed the German ifo business confidence index declined to 84.7 in December from 85.6 in November, defying economists' expectations for almost a steady outcome. The current conditions index of the survey improved, while the expectations measure slumped.

Read RTT News story German Ifo Business Confidence Worsens In December

Here is how economists analysed the ifo survey report - Jack Allen-Reynolds at Capital Economics said the gloomy picture painted by the ifo survey is broadly in line with that from the Composite PMI, published on Monday. Though both pointed to big contractions in GDP this year that failed to materialize, the fact that they are both so weak suggests that a significant turnaround in the economy is unlikely, the economist said.

"We suspect that GDP will grow next year as rising real incomes and looser monetary policy give spending a boost," Allen-Reynolds said. "But fiscal policy will remain tight, and potential growth is very weak. We forecast the German economy to grow by less than 0.5 percent in 2025."

Carsten Brzeski at ING said another disappointing year for the Germany economy draws to a close with the release of the ifo survey. This is a second consecutive year of stagnation, the first time since the early 2000s, and finally a growing awareness that Germany is again the sick man of Europe, the economist observed.

"A weak Ifo index shows that German businesses have become more worried about the country's growth outlook," Brzeski said.

Jorg Kramer at Commerzbank described the unexpected decline in the Ifo business climate as "a cold shower".

"The deep structural crisis in manufacturing is likely to prevent the ECB's falling interest rates from having any significant impact on GDP from spring onwards," Kramer said.

"We expect only GDP growth of 0.2 percent in 2025."