After the decline in Q4 GDP at the end of last year, there is a strong focus on whether this was a one-off wobble or the start of a more sustained slowdown of the German economy. Last week’s provisional PMI data suggested the latter, but this morning’s Ifo data have thrown more uncertainty into the frame, coming in slightly firmer than expected. The same held true for the ZEW data earlier in the month.

The positive news was the fifth consecutive monthly increase in the headline Ifo data, although the pace of gains slowed notably, rising only 0.1 from 109.7 in February to 109.8 (the Feb. numbers were revised a touch higher from the previous reading). This explains the very brief positive response, seen on stocks and the euro, with the single currency subsequently weakening in the first half hour after the release. Germany naturally remains the linchpin of the eurozone economy and one of the key reasons why the single currency has remained so resilient in the face of the problems of the peripheral nations. Employment is nearly 3% above the peak seen just before the onset of the global credit crisis back in 2008, whilst the unemployment rate is below the 7.0% level. But Germany has played a very long game, managing to engage in a number of labour market reforms in the middle of the last decade, as well as keeping its labour costs at competitive levels, compared from competitors both within the eurozone and beyond. This contrasts with the reforms being undertaken in many peripheral countries, implemented during a downturn and in a much shorter space of time. For now, Germany should escape a technical recession, with the overall signs for the first quarter modestly positive, but beyond then it’s still going to be tough going for most of the year for the German economy given the softer outlook for most of its trading partners.