DE: Ifo Survey

Fri Nov 24 03:00:00 CST 2017

Consensus Actual Previous Revised
Economic Sentiment 116.6 117.5 116.7 116.8
Current Conditions 125.1 124.4 124.8
Bus. Expectations 109.2 111.0 109.1 109.2

Ifo's November survey was more upbeat than generally anticipated. The overall business climate indicator rose a useful 0.7 points from a marginally stronger revised 116.8 in October to 117.5, a new record high.

The improvement in the headline index was wholly attributable to expectations which climbed a tidy 1.8 points to 111.0, their best mark since December 2010. By contrast, the current conditions gauge dipped 0.4 points to 124.4, but this was still amongst its best ever outturns.

At a sector level, confidence was up again in manufacturing (33.1 after 31.1), its fourth increase in five months, and also in wholesale (25.0 after 18.0) but declined in both construction (17.2 after 20.2) and retail (13.0 after 16.1). Even so, compared with the start of the year, the increase in business morale covers all four categories.

Ifo's latest findings are consistent with the November flash PMIs (see yesterday's calendar entry) which similarly found a manufacturing-led pick-up in economic momentum. The revised third quarter GDP data were less than bullish with regard to final domestic demand but all the signs so far are that growth this quarter should hold up very well. Indeed, Ifo has just raised its forecast for economic growth in 2017 from 1.9 percent to 2.3 percent and suggested that the current 2.0 percent call for 2018 might also be too low.

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.