The June Ifo survey points to some deceleration in economic activity at quarter-end. At 107.4 the overall business climate index was down more than a point versus its unrevised May print and at a 4-month low. The outcome was on the soft side of market forecasts.
The latest decline followed a 0.1 point dip in mid-quarter but still left a second quarter average of 108.2, up from the previous period's 107.1 mean. Even so, June's drop reflected weaker current conditions and a fall in expectations. The former was off 1.2 points at 113.1, a 3-month low and the first decrease since February, while the latter was 1 point weaker at 102.0, the third fall in as many months and equalling its lowest outcome since last December.
Amongst the major sectors sentiment deteriorated in all areas bar construction (up 1 point at minus 3.8). In particular, manufacturing (down 2.1 points at 7.9) recorded its worst reading since January and wholesale (down 2.4 points at 7.4) its lowest level since last November.
Today's results are disappointing but still suggest another quarter of modest growth in real GDP. Most worrying is the monthly profile through the period which warns that the third quarter is unlikely to start on a particularly robust footing. That said, the Ifo data are notably weaker than the flash PMIs released yesterday which signalled some pick-up in economic momentum in both manufacturing and services this month. In practice something between the two is probably close to the truth which, ultimately, should still be seen as poor compared with expectations at the start of the year.
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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