Carsten Brzeski, the Global Head of Macro for ING Research, notes that the January Ifo index shows a worsening of both the current assessment and the expectations component, signaling a very weak start to the new year for the German economy.

"Germany’s most prominent leading indicator took a hit in January. The Ifo index dropped to 90.1, from 92.1 in December, and stands at its lowest level since June. The monthly drop was the worst since April. Both the current assessment and the expectations component worsened significantly, with expectations now back at their June levels after several disappointing months."

"Today’s Ifo index shows the full impact of the stricter lockdown measures put in place in mid-December, signalling a very weak start to the new year for the German economy."

"We will only know for sure on Friday, but there is compelling evidence that the German economy avoided a double dip in the fourth quarter... The fact that the lockdown measures until mid-December were relatively light should have brought some relief as well."

"With the current lockdown measures in place until mid-February and no significant easing in the offing immediately afterwards, the short-term outlook for the German economy is anything but rosy. As so often heard over the last year, it will take more momentum in the vaccination schemes and a further reduction in the number of infections before the economy can take off again. It currently looks as if it will take at least until spring time before this will be the case."