| Consensus | Actual | Previous | |
|---|---|---|---|
| Business Climate | 90.1 | 90.2 | 88.6 |
| Current Conditions | 94.9 | 94.1 | 94.4 |
| Business Expectations | 85.0 | 86.4 | 83.2 |
Highlights
Ifo's January survey found a fourth successive improvement in overall business sentiment. A 1.6 point gain put the headline index at 90.2, its highest level since last June and a tick stronger than the market consensus.
However, current conditions actually deteriorated. Although a 0.3 point drop to 94.1 was only minor, this was still the seventh decline in the last eight months and underscores concerns about first quarter GDP. By contrast, expectations continued to make solid ground, posting a sizeable 3.2 point advance to 86.4. This was their fourth increase in as many months and their best reading since last May.
At a sector level morale strengthened across the board. The climate indicator rose from minus 5.7 to minus 0.7 in manufacturing, from minus 1.2 to 0.2 in services and from minus 20.0 to minus 15.4 in trade. The improvement in construction (minus 21.6 after minus 21.9) was less marked. However, all measures were still well short of their respective levels before Russia invaded Ukraine.
The latest findings are consistent with yesterday's flash PMI results which similarly held out hope that recession might be avoided in 2023. Indeed, with the German ECDI at 21 and the ECDI-P at 20, positive surprises in the economic data in general should at least limit the extent of any downturn in overall activity.
However, current conditions actually deteriorated. Although a 0.3 point drop to 94.1 was only minor, this was still the seventh decline in the last eight months and underscores concerns about first quarter GDP. By contrast, expectations continued to make solid ground, posting a sizeable 3.2 point advance to 86.4. This was their fourth increase in as many months and their best reading since last May.
At a sector level morale strengthened across the board. The climate indicator rose from minus 5.7 to minus 0.7 in manufacturing, from minus 1.2 to 0.2 in services and from minus 20.0 to minus 15.4 in trade. The improvement in construction (minus 21.6 after minus 21.9) was less marked. However, all measures were still well short of their respective levels before Russia invaded Ukraine.
The latest findings are consistent with yesterday's flash PMI results which similarly held out hope that recession might be avoided in 2023. Indeed, with the German ECDI at 21 and the ECDI-P at 20, positive surprises in the economic data in general should at least limit the extent of any downturn in overall activity.
Market Consensus Before Announcement
The business climate index is expected to improve for a fourth month in a row in January, to 90.1 versus December's 88.6 which was more than a point above expectations.
Definition
Ifo is an acronym from Information and Forschung (research). 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 9,000 enterprises in manufacturing, services, construction, wholesaling and retailing and a separate estimate of sector confidence is supplied for each.
Description
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.
