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German Business Outlook Dims: IFO Index Hits 3-Month Low

The German IFO Business Climate Index took an unexpected downturn, dropping to 86.4 in December — its lowest in the past three months, against the anticipated 87.8. Both current conditions and future expectations fell short, continuing the downward trend seen in previous months. Notably, current conditions have been on a decline since August 2021, reaching a level not seen since August 2020.

This aligns with the recent PMI data, further confirming the downturn in business sentiment in Germany. This shift is likely attributed to the ongoing budget crisis triggered by the constitutional court's decisions. Our take: Given the rapid deterioration of business sentiment and PMIs across the Euro Area, it seems unlikely that the ECB will lag behind the Fed in implementing rate cuts.


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