DE: Ifo Survey

Fri Apr 24 03:00:00 CDT 2015

Consensus Actual Previous Revised
Economic Sentiment 108.3 108.6 107.9
Current Conditions 112.3 113.9 112.0 112.1
Bus. Expectations 104.6 103.5 103.9

April's Ifo survey paints a generally positive picture of the German economy. The headline business climate index rose 0.7 points to 108.6, its fifth increase in the last six months and it highest level since June last year. The outcome was marginally firmer than the market consensus.

The headline improvement reflected wholly a more positive reading on current conditions as expectations posted a small decline. Hence, at 113.9, the current conditions component was up nearly 2 points versus its end of quarter mark and at its strongest level since the middle of 2014. However, expectations dipped 0.4 points to 103.5, their first drop since last October but only enough to reverse a part of March's 1.4 point gain.

At a sector level, sentiment turned more positive in both manufacturing (14.2 after 12.6) and wholesale (12.7 after 10.1) and also made progress in construction (minus 5.3 after minus 7.7). Retail (2.6 after 5.2) was less optimistic and (unadjusted) morale in services (22.7 after 23.3) similarly deteriorated.

Overall today's results are rather more upbeat than yesterday's flash PMIs but both reports point to a decent start by the economy to the second quarter. On Wednesday the government revised up its annual growth forecast for this year from 1.5 percent to 1.8 percent and for 2016 from 1.6 percent to also 2015. These projections are on the low side of most private sector forecasts but with consumption underpinning the upturn, they should still be good news for recovery prospects in the Eurozone as a whole.

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.