German business climate rises marginally in February

German bunds jump despite better-than-expected Feb Ifo business climate; Q4 GDP eyed

German bunds jump despite better-than-expected Feb Ifo business climate; Q4 GDP eyed

County's automotive sector faces disruption from a costly move to electrification.

German business morale rose unexpectedly in February, a survey showed on Monday, easing recession fears in Europe's largest economy and reflecting a slight improvement in its manufacturing sector, which has been struggling with falling exports.

The Ifo institute said its business climate index rose to 96.1 from an upwardly revised 96.0 in January. In the markets, Italy will sell index-linked and zero-coupon bonds on Wednesday, while Germany will sell 5Y OBLs the following day. GDP grew 0.4% on year in the fourth quarter on a calendar and price-adjusted basis, Destatis said, confirming the first estimate.

Ifo warned however that the survey did not fully reflect the possible economic fallout from the coronavirus, which could hurt growth if it becomes a pandemic.

Shrinking exports held back German economic activity in the fourth quarter of previous year, detailed data showed on Tuesday, confirming that Europe's largest economy was stagnating even before the coronavirus outbreak began.

German bunds jump despite better-than-expected Feb Ifo business climate; Q4 GDP eyed

Bosses in Germany's chemicals and mechanical engineering sectors are also expecting an export-decline in the near future.

Germany's economic output stagnated in the fourth quarter of 2019 as exports from Europe's largest economy fell.

In addition, "Chinese tourists have become an important driver of consumption in Germany, accounting for nearly half of annual duty-free sales", said Mr Brzeski.

The ifo Export Expectations are based on around 2,300 monthly reports from manufacturers, who are asked to report their export expectations for the next three months. While the impact of the health emergency in China has so far been minimal on the German economy, Kenningham added, the scenario could change if the virus crisis persists in the upcoming months. In addition, it emphasizes that the German economy is not being affected, at the moment, by the consequences of the coronavirus.

The virus has killed some 2,600 people and infected over 80,000 since it emerged in China late a year ago, and fears of a wider outbreak are growing after South Korea, Italy and Iran reported a spike in cases.

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