German economy growing strongly

Fundamental Analysis

EUR

“The German economy is growing strongly.”

- Clemens Fuest, CESIfo Group

The mood of German companies improved unexpectedly in April, as the Ifo German Business Climate Index surged to 112.9, while experts expected that it would remain unchanged. Thus, the released figure hit a new record high in about six years, updating the previous month's record. Positive sentiment was registered in all four major sectors. Namely, in the retailing sector the Index reached its highest level since September 2015. In the construction sector assessments of the current business situation also hit a new record high. Similarly, estimates of the situation in the wholesale sector reached its highest value since 1991. Finally, manufacturers, especially from the electrical goods sector, also expected their production to rise. Such optimistic outlook is most likely based on a strong performance of the German economy in the Q1. The latest data on jobless claims showed that unemployment rate was equal to 3.9% and, thus, remained stable since November 2016. Nevertheless, inflation growth remained subdued, with the March inflation rate falling to 1.6%, the lowest in four months. It should be noted that April's survey was conducted prior to the first round of the French presidential election. Therefore, the Index did not reflect German businesses' reaction to the first-round election outcome.

CAD

“We're calling for some slippage. Wholesale trade could be a first taste of what's ahead.”

- CIBC World Markets

Canadian wholesale trade fell less than expected during the second month of the year amid lower sales of household goods and food. Statistics Canada reported on Monday that wholesale sales dropped 0.2% on a seasonally adjusted basis in February to C$58.86B ($43.58B), following the preceding month’s downwardly revised gain of 3.0%. However, that came in above analysts' forecasts of a 1.0% decline. In volume terms, sales edged down 0.4%. On an annual basis, wholesale trade climbed 6.6%. Sales declines were registered in four out of seven sectors, making up 54% of wholesale trade. The personal and household goods sector contributed the most to the February drop, with sales decreasing 1.7%. Moreover, sales fell in five out of six of the sector’s industries. Sales in the food, beverage and tobacco sector dropped 1.0%, with the biggest declines in the food industry. Nevertheless, the building material and supplies sector posted a 0.6% rise, partially offsetting declines in other sectors and marking the fifth straight monthly increase. In the meantime, wholesale inventories increased 0.2% and 2.2% month-over-month and year-over-year, respectively. The following rise signalled that production exceeded consumption in the reported month.

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