The full report by German Ifo Institute for Economic Research, a Munich-based research institution, was released on Monday.
It has made financial analyst at Steno Research Ulrik Simmelholt doubt the story of the German reflation.
“Overall, there is not a lot of fuel to the reflation story in Germany,” he states.
“Price expectations in services excluding real estate continued its downtrend,” he continues, elaborating, “We now find ourselves at 2018-19 levels in what is pointing towards lower core inflation readings in the second half of the year.”
He highlights, however, that price expectations in manufacturing has climbed had have bottomed out at levels consistent with the price mandate of the European Central Bank (ECB).
“The drop in input prices, the global reflation story and expectations of ECB rate cuts seem to have had an effect and the question now becomes which of the two manufacturing and service price expectations will impact inflation come Summer and Fall the most,” he says.
“The Ifo report details did overall not support a strong reflation narrative from Germany with only chemicals moving out of the doldrums on orders to inventory ratios, while, say, the Auto sector remains stuck in the abyss.”