Just a day after things went “from bad to worse” for Germany’s manufacturing slump, things went from worse to, well, worser?
Ifo’s gauge of business expectations plunged to 92.2 for July, data out Thursday showed. That’s the lowest reading since 2009.
The news comes barely 24 hours after the flash read on Germany’s manufacturing PMI printed the lowest in seven years.
Ifo’s current conditions gauge dropped too, falling to 99.4 from 101.1 in June, leaving the headline business confidence index at 95.7. That’s down from 97.5 last month and below the most pessimistic analyst estimate (the range of forecasts was 96.3 to 98, from more than three-dozen economists).
Just as Wednesday’s abysmal PMI data reignited the global DM bond rally, yields fell following the latest indication that the German economy may be headed for a technical recession.
10-year bund yields fell below the ECB depo rate, just hours ahead of the central bank’s new statement and Draghi’s post-meeting remarks. In a re-run of Wednesday, 10-year yields in the Netherlands, Finland, Austria, France and Belgium all dropped to new record lows. That, after Aussie yields hit new lows overnight as well.
You’d think Berlin would be inclined to roll out some fiscal stimulus to stanch the readily apparent bleeding, but as Bloomberg rather dryly noted on Thursday morning, “Angela Merkel takes the approach that a slowdown after a period of historic growth is normal, and the headwinds will ease when US President Donald Trump’s trade wars get resolved”.
That assumes Trump’s trade wars actually do get resolved. Suffice to say a resolution isn’t necessarily a foregone conclusion.
I think she’s saying ‘when Trump is defeated at the polls’. (We should be buying shares of companies making champagne. There will be lots of champagne flowing on that day.)