Frankfurt, Germany – German business confidence edged up in April, a survey showed Monday, but analysts warned optimism about falling energy prices and China’s reopening was being offset by worries about higher interest rates.
The Ifo institute’s monthly confidence barometer, based on a survey of about 9,000 companies, rose to 93.6 points from 93.2 points in March, its seventh straight increase.
But the rise was weaker than expected, with analysts surveyed by financial data firm FactSet predicting a reading of 94.0 points.
“German business’s worries are abating, but the economy is still lacking dynamism,” said Ifo president Clemens Fuest.
Manufacturers have been boosted in the short term by lower energy prices — which had surged last year following Russia’s invasion of Ukraine — and the reopening of China’s economy after long Covid shutdowns.
But the Germany economy was still “far away from strong growth” and it would “continue its flirtation with recession,” warned ING economist Carsten Brzeski.
The second half of the year is “when the impact of the most aggressive monetary policy tightening in decades will fully unfold and when a slowdown of the US economy will hit German exports,” he said.
The European Central Bank has repeatedly hiked interest rates to bring down inflation, which surged after the start of the Ukraine war.
Germany’s preliminary first-quarter growth data will be released Friday, with markets waiting to see whether the economy shrank for a second straight quarter — entering a “technical recession”.
But Brzeski predicted that chances were “high” the figure would come in positive.