Economic sentiment worsened in October according to the new Ifo survey. However, at 108.2, the overall business climate indicator was only 0.3 points short of its unrevised September reading and slightly firmer than expected.
The minor dip in the headline index was wholly attributable to weaker current conditions which fell from 114.0 to 112.6, their second consecutive decrease and their lowest mark since March. By contrast, expectations surprisingly managed a second successive small gain. At 103.8 their sub-index was 0.5 points above its September print and at its highest level since June 2014.
Morale across the major sectors was mixed. Hence, there were falls in manufacturing (9.7 after 10.1 and an 8-month low) and retail (10.9 after 14.7) but gains in construction (0.8 after 0.3) and services (32.4 after 30.5). Wholesale (13.7) was unchanged. Somewhat unexpectedly, Ifo said that the VW emissions scandal had had no impact on sentiment in the car sector.
Today's results are not very different from those of the October flash PMI released last week. This similarly pointed to economic growth being little changed this month but also increasingly reliant on the services sector.
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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