German Ifo Business Gauge Halts Slide in Sign of Stabilization

(Bloomberg) -- German business confidence halted a five-month slide as companies took stock after a temporary slowdown in Europe’s largest economy at the start of the year.

The Ifo institute’s gauge of business climate held at 102.2 in May, with indexes measuring current conditions and expectations little changed. Economists predicted a drop to 102 from an original April reading of 102.1.

German Ifo Business Gauge Halts Slide in Sign of Stabilization

The euro pared some of its losses after the report. The single currency traded at $1.1702 at 10:18 a.m. Frankfurt time, still down 0.2 percent.

Germany’s most-watched sentiment survey signals the economy is stabilizing after a quarter in which exports fell the most in more than five years and a range of indicators showed flagging growth. The Bundesbank reiterated this week that it still expects German momentum to pick up in the second quarter, with investments projected to improve after bad weather and a flu epidemic damped output.

European Central Bank chief economist Peter Praet has also put a brave face on recent developments, saying Thursday that the euro-zone economy was “doing good.” He pointed to stretched capacity at the region’s companies as one reason for weaker growth.

But clouds are gathering on the horizon. President Donald Trump’s announcement that his administration is investigating import tariffs on cars and truck could hit the German economy hard -- the U.S. is the country’s largest export market for luxury vehicles. A report from Ifo on Thursday showed tariffs on cars could subtract 5 billion euros ($6 billion), or 0.16 percent from German economic output.

ECB officials flagged protectionism and mounting global risks as potential threats to the euro area at their April 25-26 Governing Council meeting, arguing that close monitoring is warranted to judge implications for growth and inflation. They hold their next policy session on June 14.

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