German business confidence unexpectedly drops in April

German business confidence unexpectedly deteriorated in April, according to research from Munich-based research institute Ifo.

Ifo’s business climate index printed at 106.6 compared to 106.7 in March and expectations for a reading of 107.

Meanwhile, the current assessment index came in at 113.2 from 113.8 the month before, versus expectations of an unchanged reading.

The expectations index nudged up to 100.4 from 100.0 but was a touch shy of forecasts of 100.8.

Capital Economics said the data added to signs of a slowdown.

“While expectations edged up in April, the current conditions index weakened. And it is somewhat disappointing that sentiment has failed to recover fully from the falls seen at the start of the year, which at the time were widely put down to temporary fears about the global economy.

“The Ifo Institute estimates that German GDP will have risen by about 0.6% q/q in Q1, which doesn’t seem wildly optimistic given developments in the hard data. However, we still see growth slowing in the rest of the year as earlier boosts from the euro’s depreciation and price declines fade. As such, we think that the consensus forecast of 1.6% German GDP growth this year is too optimistic and expect an expansion of more like 1.2%.”

"Overall, today’s reading shows that uncertainty and pessimism among German companies has diminished recently. Financial-market turmoil has waned and the latest hard data from China was better than some worried market observers predicted. However, and to be fair, the latest figures do not give the all-clear, and downside risks clearly remain," Dr. Tobias Ruhl, economist at UniCredit Research, said in a note sent to clients.