DE: Ifo Survey

Mon Jun 25 03:00:00 CDT 2018

Consensus Actual Previous Revised
Economic Sentiment 101.7 101.8 102.2 102.3
Current Conditions 105.6 105.1 106.0 106.1
Bus. Expectations 97.9 98.6 98.5 98.6

Ifo's new survey found little change in economic sentiment this month. At 101.8, the June business climate indicator was just 0.5 points short of its marginally firmer revised May outturn and broadly in line with the market consensus. Even so, this was the measure's fourth decline in the last five months and equalled its weakest mark since March 2017.

Morale was lower across all of the major production sectors with wholesale (11.3 after 14.5) recording the steepest drop. Manufacturing (23.8 after 24.1) and retail (19.4 after 20.4) held up rather better but still saw multi-month lows, as did services (25.9 after 27.1).

The headline deterioration reflected wholly a renewed worsening in current conditions where the sub-index dropped a full point to 105.1. This more than reversed May's rise, the first since January, and made for the lowest reading since June 2017. Expectations at least held steady at 98.6 although, following six successive declines, this was hardly reason for optimism.

The Ifo results are rather weaker than the flash PMI report released last week. That pointed to a modest rebound in business activity although it too found a further slowdown in manufacturing. In any event, both surveys suggest that second quarter German GDP growth will be little better than the modest 0.3 percent quarterly rate achieved 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.