--Indicators Point to German Annualised 2Q Growth of 2.2% Vs 3% In 1Q
FRANKFURT (MktNews) - The Handelsblatt leading economic index for west Germany stabilised in March after declining each of the previous four months, while the east German indicator rose, according to the business daily's Tuesday edition.
The west German leading indicator was steady at 2.1% in March, well below the recent peak of 3.3% reached in October last year. The east German indictator inched up to 3.1% from 3.0% in February, but was below the peak of 4.0% in August and September last year.
The index results indicate that pan-German annualised growth will slow from a 3% rate in the first quarter to only 2.2% in the second quarter, the Handelsblatt said.
The stabilisation in the west German leading index in March was due to increases in manufacturing and construction orders, as well as retail sales. Offsetting these gains were declines in the Ifo index for manufacturing sector sentiment as well as the differential between long- and short-term interest rates.
While total manufacturing orders rose strongly in December -- particularly foreign orders for investment goods -- it remains an open question if this development will continue, as domestic equipment investment contributed virtually nothing to GDP growth in the fourth quarter and as a weakening economy in some parts of the world suggests weaker exports, the newspaper said.
The somewhat stronger showing of the construction sector was due to rising orders for non-residential buildings and public works projects, whereas there was a continuing downturn in housing demand. The medium term prospects for the construction sector, especially in east Germany, remain very modest, the Handelsblatt said.
There are signs that the retail sector improved in January due to discounts and the effects of income tax cuts that took effect at the start of the year. But doubts remain concerning the magnitude of the effects of the tax reform, since increases in energy taxes and other fees have eaten away a part of consumers' additional spending power and since consumers may save some of their additional disposable income, the newspaper wrote.
The west German Handelsblatt economic indicator index is composed of the Ifo manufacturing sentiment index, orders in the manufacturing and construction sector, the differential between short- and long-term interest rates, and retail sales. The Handelsblatt economic indicator for east Germany is based on the Ifo business sentiment index for the manufacturing and retail sectors, as well as orders in the manufacturing and construction sectors.