DE: Ifo Survey

Thu Feb 22 03:00:00 CST 2018

Consensus Actual Previous Revised
Economic Sentiment 117.0 115.4 117.6
Current Conditions 127.0 126.3 127.7 127.8
Bus. Expectations 107.9 105.4 108.4 108.3

Business sentiment worsened slightly this month according to the new Ifo survey. The headline climate indicator was down 2.2 points at a weaker than anticipated 115.4, equalling its lowest reading since June last year. However, the outturn remained amongst the highest on record.

The headline fall was mainly attributable to less optimistic expectations which declined nearly 3 points to 105.4. This was their second consecutive drop and the worst print since April 2017. Current conditions held up rather better, posting a 1.5 point decrease from January's (upwardly revised) all-time high to 126.3. This only partially reversed that month's 2.3 point bounce and left the second strongest reading on record.

At a sector level, morale was weaker across the board. Manufacturing (28.0 after 33.2) saw the steepest decline ahead of retail (11.0 after 15.2). Wholesale (20.6 after 23.5) and construction (15.9 after 17.7) recorded rather smaller drops.

The Ifo results essentially mirror the flash PMIs in pointing to some cooling in German business activity this month. However, the deterioration is only mild and in relative terms today's report is still very robust. First quarter GDP growth should not disappoint.

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.