Ifo's business climate indicator continued to climb in March. At 107.9, the headline index was up a further 1.1 points versus its February reading, slightly above the market median call and at its highest level since last July. Sentiment on this measure has now improved for five months in a row.
The latest gain reflected fresh progress in both the current conditions and expectations components. The former gained 0.7 points to 112.0, its fourth increase since October and also its strongest mark since the middle of 2014. Expectations improved more substantially, rising 1.4 points to 103.9, a fifth successive increase and the largest over the period. They are now at their most optimistic level since last June.
Promisingly, the headline gain was broad-based amongst the sectors too with just construction suffering a reversal. Confidence in manufacturing, retail and wholesale all posted respectable advances to new multi-month peaks.
The German economy looks to have made very solid progress since a disappointingly sluggish third quarter. Fourth quarter growth of 0.7 percent may not be matched in the current period but real GDP still looks well on course to achieve a rate that satisfies both domestic and Eurozone policymakers alike.
Published by the Ifo Institute, the Business Climate Index is closely watched as an early indicator of current conditions and business expectations in the German economy. The Institute surveys more than 7,000 enterprises on their appraisals of the business situation and their short-term planning.
The headline index has a good correlation with developments in overall GDP and so has a major influence in shaping views on how the national economy is performing. The main focus is the expectations index. It is generally published during the last week of the month for the current month with more detailed information available about a week later.
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