Carsten Brzeski, chief Economist at ING Germany, offered his take on the latest disappointment from Germany’s most prominent leading indicator, the Ifo index, which dropped for the third month in a row to its lowest level in more than four years.

“The German economy currently is the best showcase model for a broader phenomenon: the stark discrepancy between external risks and uncertainty and solid domestic fundamentals. This discrepancy explains why, despite the sharp slowdown in confidence indicators, economic growth has actually been holding up well. The second quarter does not (yet) look recessionary. The big question for the months ahead is clearly whether this time could really be different. If the decoupling between manufacturing and services were part of a structural transition, then it could be. But if previous patterns were to prevail, the slump in the manufacturing sector could infect the rest of the economy. We maintain our optimism and favour the hypothesis that this time is indeed different.”