DE: Ifo Survey

Wed Oct 25 03:00:00 CDT 2017

Consensus Actual Previous Revised
Economic Sentiment 115.1 116.7 115.2 115.3
Current Conditions 123.5 124.8 123.6 123.7
Bus. Expectations 107.3 109.1 107.4 109.1

The October Ifo survey was surprisingly upbeat about the German economic situation. The overall business sentiment index gained a very useful 1.3 points versus a marginally stronger revised September reading to stand at 116.7, a new record high.

Significantly, the headline improvement reflected renewed advances in both the current conditions and expectations components. The former advanced 1.1 points to 124.8 and so more than reversed its September decline. This measure now stands nearly 10 points above its mark a year ago. Expectations performed even better, rising 1.6 points to 109.1, their best level since December 2010 and a 3.4 point increase from October 2016.

At a sector level, confidence was up in all the major categories bar wholesale (17.9 after 19.4). Manufacturing (30.9 after 28.0) and construction (19.9 after 18.5) both saw decent gains but it was retail (16.1 after 7.8) which made the most impressive progress. This could be significant as in recent months retail sales have disappointed and could be set for a potentially sizeable rebound.

In any event the overall tone of today's report is very robust and certainly more positive than the (still very respectable) flash PMI survey released yesterday.

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.