Ifo index brings some relief to Germany's economic toxic mix - ING

Carsten Brzeski, chief economist ING Germany, notes that, after an almost free-fall since the summer of 2018 and 13 drops in 16 months, Germany’s leading indicator stabilized in October and remained at 94.6. 

• "While the current assessment component dropped to 97.8 from 98.5, the expectations component halted its recent fall and increased to 91.5 from 90.8. The latter signals that the freefall of the economy could have come to a (temporary) halt.
• Despite today's Ifo news, the German economy remains caught in the toxic mix of external uncertainties, the global manufacturing slowdown and homemade structural weaknesses. In fact, even though the jury is still out, it looks increasingly hard for the German economy to avoid a technical recession; that would require a strong rebound in economic activity in September.
• What is worrisome currently is the fact that the service sector seems to have lost its immunity against the manufacturing slowdown. Yesterday’s PMI services dropped to the lowest level in more than three years, adding to the risk of a negative sentiment loop, while earlier today, German consumer confidence added to recent pessimism as well. The GfK index for November is indicating a consumer climate value of 9.6 points, down 0.2 points from October, falling to its lowest level since November 2016.
• Looking ahead, high inventories and thin order books do not bode well for the manufacturing sector in the months ahead. While a likely Brexit extension and positive headlines from trade could bring some short term relief, the experience of recent years suggests we need to be extremely cautious. Some relief can easily be followed by new disappointments. Or to stick to a horror narrative: the monster very often returns before disappearing for good."