| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Business Climate | 87.5 | 87.3 | 86.9 | |
| Current Conditions | 89.4 | 89.4 | 89.2 | |
| Business Expectations | 85.9 | 85.2 | 84.7 | 84.8 |
Highlights
Ifo's November survey was just marginally softer than the market consensus. At 87.3 the overall climate indicator was 0.2 points short of expectations and up from October's 86.9. This made for the first back-to-back rise since March/April and left the index matching its highest level since June. That said, historically, it remains very weak.
Current conditions gained 0.2 points to 89.4, their strongest outturn since July but leaving an essentially flat trend since August. Expectations advanced a slightly larger 0.4 points to 85.2, their third consecutive rise and their best mark since May.
At a sector level sentiment generally improved. Hence, there were modest gains in manufacturing (minus 13.5 after minus 15.7), trade (minus 22.2 after minus 27.3) and construction (minus 29.4 after minus 30.8). However, services (minus 2.1 after minus 1.5) posted a slight deterioration.
The November results suggest that the economy is weak but also point to only a limited downswing. Any contraction in GDP this quarter ought to be quite mild. Still, sluggish demand will weigh on inflation so today's update further bolsters the likelihood of no change from the ECB next month. It also puts the German RPI at minus 2 and the RPI-P at minus 3, showing that in general, economic activity is performing much as the forecasters predicted.
Current conditions gained 0.2 points to 89.4, their strongest outturn since July but leaving an essentially flat trend since August. Expectations advanced a slightly larger 0.4 points to 85.2, their third consecutive rise and their best mark since May.
At a sector level sentiment generally improved. Hence, there were modest gains in manufacturing (minus 13.5 after minus 15.7), trade (minus 22.2 after minus 27.3) and construction (minus 29.4 after minus 30.8). However, services (minus 2.1 after minus 1.5) posted a slight deterioration.
The November results suggest that the economy is weak but also point to only a limited downswing. Any contraction in GDP this quarter ought to be quite mild. Still, sluggish demand will weigh on inflation so today's update further bolsters the likelihood of no change from the ECB next month. It also puts the German RPI at minus 2 and the RPI-P at minus 3, showing that in general, economic activity is performing much as the forecasters predicted.
Market Consensus Before Announcement
The business climate index, which at 86.9 in October was for more than a point above expectations, is expected to rise 6 tenths in November to 87.5.
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.
