Ifo's February survey found a fifth successive improvement in overall business sentiment. A 1.0 point gain versus a marginally softer revised January mark put the headline index at 91.1, its highest level since last June but slightly weaker than the market consensus.

Current conditions actually deteriorated again. A 0.2 point dip to 93.9, a 3-month low, means that, apart from December, the sub-index has fallen every month since last May. However, expectations continued to make solid ground, posting another sizeable 2.1 point advance to 88.5. This was their fifth increase in as many months and their best reading since last February. All of the main sectors recorded stronger sentiment this month but Ifo still forecast a mild recession in 2023.

Today's slightly disappointing results trim the German ECDI to 5 and the ECDI-P to 6. That said, both values suggest that overall economic activity is moving much as financial markets anticipated.

After improving for five months in a row, the business climate index is expected to improve again in February, to 91.4 versus January's 90.2.

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.

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.