The DAX began to accelerate again on Monday morning, after a mixed performance at the end of last week which saw it gain 1%, then lose half, in the space of 24 hours.
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On the morning of June 24, from the first opening hours of the German markets, the index gained 0.53% to trade around $18,295.61.
The DAX was at around $18,271.61 as this article went to press.
This reversed losses when the DAX fell 0.50% to 18,164 points on Friday June 21, after rising 1.03% to 18,254.18 points on June 20.
The IFO business climate index
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The good news on June 26, when the IFO Institute releases its latest monthly figures on business climate expectations in Germany, will be crucial for the DAX’s performance this week.
Expectations for business confidence in June are muted, with analysts overall forecasting a reading of 89.7 for the month, up slightly from May’s 89.3.
After a positive April 2024, in which the expectations index reached 89.9 – its highest level in a year and significantly above expectations of around 88.9 – German business confidence has somewhat marked time.
Figures for May 2024 showed little or no change, with the IFO Business Climate Index remaining stable at 89.3 points on May 27, its last reading before today.
According to the Institute in May:
Companies were less satisfied with their current business situation, but expectations have improved. The manufacturing, trade and construction sectors are recovering, although the services sector has been slightly affected. The German economy is gradually emerging from the crisis.”
A disappointing summer ahead
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The German summer forecast from the IFO Institute was also published recently, on June 20.
His prognosis was grim in the short term, stating that:
Economic output in the second quarter will increase by 0.3%, barely faster than in the previous quarter. The manufacturing industry, thanks to its export activities, supports the economy, while construction will likely continue its downward trend and suffer a sharp decline. According to available economic indicators, private consumption is expected to initially stagnate further.”
The forecast adds that “the European Football Championship hosted in Germany will not change anything either and will not cause a summer fairy tale for the German economy. Although sales in the hospitality and food retail sectors will recover briefly during the Championship, domestic consumers will likely reduce spending elsewhere, so private consumption as a whole is unlikely to be affected.”
Will Europe’s largest economy finally beat inflation?
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However, the IFO summer forecast brought some encouraging news. Both in terms of inflation and interest rates.
The rest of the year, after summer, the situation should improve, according to the Institute.
One concrete way would be that Europe’s largest economy will likely bring its inflation back to the EU target level for the first time in years:
Inflation will fall below 2% this summer for the first time since March 2021.”
The IFO Institute also predicts that it expects two more interest rate cuts from the European Central Bank this year, following its first cut in June.
The interest rate cut planned for the end of 2024 will help encourage spending and stabilize the labor market in Germany, while simultaneously helping to get “construction back on its feet”.
After all this, it is assumed that consumer confidence will rise in Europe’s largest financial nation – but, until then, the Germans may have to hunker down and tough it out.
This article was translated from English using artificial intelligence tools, then proofread and corrected by a local translator.
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