German Business Sentiment Wanes but Fails to Sink the EUR

Going into the European session, German wholesale inflation figures drew attention ahead of German Ifo Business Climate figures.

Wholesale Inflation

In November, Germany’s producer index increased by 0.8% after having risen by 3.8% in October. More significantly, Germany’s annual rate of wholesale inflation accelerated from 18.4% to 19.2%. Economists had forecast a monthly rise of 1.4% and an annual rate of wholesale inflation of 19.9%.

According to Destatis,

• The annual rate of wholesale inflation was the most marked since Nov-1951 (+20.6%).
• Rising energy prices (+49.4%) contributed to the increase in producer prices when compared with Nov-2020.
• There were also marked prices increases on intermediate goods (+19.1%), driven by a 79.1% surge in prices of secondary raw materials.
• Prices of non-durable consumer goods increased by 3.7%, year-on-year, driven by prices for oils and fats.

Business Sentiment

For December, the Ifo Business Climate Index fell from 96.5 to 94.7 versus a forecasted decline to 95.3.

Weighing on the headline number was a fall in the Business Expectations indicator from 94.2 to 92.6 and the Current Assessment indicator from 99.0 to 96.9.

According to the December survey,

German Manufacturing:

• The business climate index rose from 16.7 to 17.3, after having fallen for 5 consecutive months from a June 28.9.
• More optimistic expectations contributed, with order books on the rise.
• Companies’ assessments of the current situation were worse, however, with supply bottlenecks for intermediate products and raw materials intensified once more.

German Services:

• The business climate slumped from 11.6 to 4.5, with the last similar size decline registered in April 2020.
• Service providers were considerably less satisfied with their current business.
• Expectations also turned pessimistic.

Market Impact

Ahead of today’s stats, the EUR had risen to a pre-stat and current day high $1.13489 before easing back.

In response today’s stats, the EUR fell to a post-stat and current day low $1.13173 before rising to a post-stat high $1.13398.

At the time of writing, the EUR was up by 0.03% to $1.13341.

Next Up

Finalized November inflation figures for the Eurozone. With no material stats due out of the U.S later in the day, expect any FOMC member chatter to also draw interest.