Sentiment in the German business sector has improved as the country’s leading indicator increased for the sixth month in a row, but analysts say the latest financial fall out will catch up to the real economy in the “coming months.”
On Monday, the Ifo Business Climate Index rose to 93.3 points in March, from 91.1 points in February. This is Munich-based Ifo Institute for Economic Research’s fifth consecutive reported rise in the index.
The increase has been driven by better business expectations, lower wholesale gas prices and the reopening of the Chinese economy, analysts say.
But Carsten Brzeski, ING’s global head of macro, was skeptical. “The latest economic sentiment indicators nicely illustrate that for now, financial market turmoil appears to be ringfenced and has not affected the real economy,” he told clients in a note.
“We are more careful, however, and remind everyone that the Ifo index can react with a delay of one to two months to unexpected events and financial market turmoil can clearly affect the real economy over time,” he added.
German banking giant Deutsche Bank
led a rally in European’s bank shares, rising 2.8% early Monday, and recouping some of the losses after a major sell-off last week, sparked by the Credit Suisse
takeover by UBS
Gains were also seen for some U.S. regional banks, such as First Republic Bank
climbed 25% in premarket trading.
Those gains came after a deal announced earlier Monday for First Citizens
to buy the deposits and loans of failed Silicon Valley Bank. The failure of Silicon Valley Bank helped kick off a crisis in the sector earlier this month.
Brzeski also added that the German economy will continue to “flirt” with a recession, but more important factors influencing a supposed period of “subdued growth” include the war in Ukraine, ongoing energy transition and its aggressive monetary policy tightening.