Ifo's latest survey suggests no change in economic conditions this month. At 110.4, the overall business climate indicator matched its marginally weaker revised October reading and was also broadly in line with the market consensus.
The stability of the headline index reflected a minor improvement in the assessment of current conditions (up 0.5 points at 115.6) offset by a small deterioration in expectations (down 0.4 points at 105.5). The rise in the former was the third in a row and put the measure at its highest level since April 2012. The dip in expectations still left the second strongest mark since April 2014.
At a sector level, moves in morale were rather sharper. Hence, confidence in manufacturing was down 2.3 points at 14.7 but up 5.2 points at 15.0 in wholesale, 1.5 points at 9.3 in retail and 1.1 points at 11.4 in construction. The services climate index was also a tidy 2.5 points firmer at 34.8, extending the solid upward trend seen since August and its strongest reading so far in 2016.
Today's results are much in line with the November flash PMI survey findings where the provisional composite output index dipped just a couple of ticks to 54.9. Fourth quarter economic growth looks likely to build upon the disappointingly soft 0.2 percent third quarter rate but it will struggle to get anywhere close to the 0.7 percent mark recorded at the start of the year.
Published by Munich's Ifo Institute, the Business Climate Index is closely watched as an early indicator of morale in German industry. In addition to overall gauge of sentiment, data are provided on its two components, current conditions and expectations. As a forward looking indicator, the latter is normally seen as the more important. Ifo surveys more than 7,000 enterprises in manufacturing, construction, wholesaling and retailing and a separate estimate of sector confidence is supplied for each.
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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