The new Ifo survey paints a reasonably upbeat picture of the German economy at the start of the third quarter. At 108.0, the overall business climate index was up 0.5 points versus a marginally stronger revised June outturn for its first increase in three months. However, while exceeding the market consensus, July's advance failed to recover all of June's 1 point loss and left the indicator within the tight 106.7-108.7 range seen over 2015 to date.
July's modest improvement was mainly attributable to a more optimistic assessment of current conditions which climbed 0.8 points to 113.9, although this was still short of May's 114.4 mark. Expectations gained just 0.3 points to 102.4 but at least secured their first rise in four months.
At a sector level sentiment was mixed with gains in wholesale (14.1 after 7.5) and manufacturing (11.3 after 10.9) contrasting with falls in construction (minus 4.5 after minus 3.7) and retail (4.0 after 5.6). The unadjusted service sector index also shed 1.5 points to 25.9.
Overall today's results suggest little change in underlying economic trends. The increase in the headline index contrasts with the dip in the July flash PMI composite index but is too small to be of any real significance and anyway, probably just reflects some relief at the latest developments in Greece. The economy would seem to be expanding at a moderate rate, but nothing more than that.
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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