DE: Ifo Survey

Thu Jan 25 03:00:00 CST 2018

Consensus Actual Previous Revised
Economic Sentiment 117.0 117.6 117.2
Current Conditions 125.3 127.7 125.4 125.5
Bus. Expectations 109.2 108.4 109.5 109.4

Business sentiment remained elevated this month according to the new Ifo survey. At a stronger than expected 117.6, the business climate indicator reversed all of December's drop to match November's record high.

January's rebound was wholly attributable to an improvement in the current conditions component. This measure rose a solid 2.2 points to 127.7, more than 11 points above its level a year ago and also a new all-time peak. By contrast, expectations were a little softer, dipping 1 point to 108.4, their lowest outturn since September. It may be that the ongoing political uncertainty prompted by last September's inconclusive federal election has had a negative effect.

At a sector level, morale was up in manufacturing (33.2 after 31.8) and wholesale (23.5 after 22.6) but down in construction (17.8 after 18.3) and retail (15.1 after 15.8). However, in both categories where sentiment deteriorated the latest level was still historically firm.

The overall results essentially match the bullish picture of economic activity painted by the flash January PMI survey released yesterday. While early days yet, first quarter German GDP looks likely to impress.

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.