December's Ifo survey was slightly weaker than anticipated with a 0.3 point dip in the business climate indicator to 108.7 reflecting a modest deterioration in current conditions.
The current conditions index was down 0.6 points on the month at 112.8 and so reversed nearly its entire November rise. Expectations on the other hand were unchanged at 104.7 and so matched their highest reading since May 2014.
Amongst the major production sectors, manufacturing morale edged up 0.2 points to 12.3, its best level since May, and services saw a 0.1 point gain to 33.7. However, retail was down 0.9 points at a 5-month low of 7.9, wholesale dropped 3.3 points to 11.8 and construction was off 0.6 points at 1.8.
Throughout the year the headline sentiment index has held within a relatively tight 106.8-109.0 range suggesting that economic conditions over the period have been quite stable. Despite its drop, December's outturn was both at the upper end of this band and historically firm and so suggests, in line with the flash PMI data released earlier in the week, that the economy ended 2015 on a reasonably optimistic note.
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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