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Good news came from Germany: Europe’s largest economy is surprisingly strong

In April, one of the most important German economic indicators, the Ifo index, rose for the seventh consecutive month and rose to 93.6 points from 93.3 points in March. The sub-index of expectations has risen, but is still below the historical average, while the assessment of the current situation has worsened. According to analysts at ING Bank, this combination illustrates that lower gas prices and the restart of the Chinese economy have improved economic sentiment, but the German economy is still suffering from strong growth.

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Data from the first two months of the year show the recovery of German economic activity, especially in industry. This was helped by the start of Chinese growth and the easing of supply disruptions. However, according to ING analysts, this rebound will be short-lived.

Meanwhile, private consumption is still weak due to high retail energy prices, and wage increases can only partially and temporarily moderate the decline in purchasing power.

According to ING, the German economy may still be in recession in the second half of the year, as the most serious monetary tightening in decades will be felt in the second half of the year. In addition, the slowdown of the American economy is also pushing back German exports. In addition to the cyclical factors, the war in Ukraine, demographic change and the energy transition may hamper the German economy in the coming years.

The recent Ifo index also reveals the stronger-than-expected resilience of the German economy, and according to ING, there is even a high chance that the first-quarter GDP data will show positive growth. However, this may be temporary and the possibility of a recession cannot yet be ruled out.

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