| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Business Climate | 86.8 | 85.2 | 86.4 | 86.3 |
| Current Conditions | 88.6 | 87.0 | 88.5 | |
| Business Expectations | 85.0 | 83.5 | 84.3 | 84.2 |
Highlights
Ifo's January survey was softer than expected. At 85.2 the overall climate indicator was 1.6 points short of the market consensus and more than a full point below December's downwardly revised 86.3. The latest reading was the worst since May 2020 and historically very weak.
Current conditions shed 1.5 points to 87.0, a second successive drop and their lowest mark since July 2020. Expectations compounded December's 0.9 point fall with a 0.7 point decline to 83.5. However, while also well below their long-run average, this was only a 2-month trough following modest gains in September-through November last year.
Outside of manufacturing (minus 16.0 after minus 17.4), at a sector level sentiment deteriorated across the board. Hence, there were losses in services (minus 4.9 after minus 1.7), trade (minus 29.7 after minus 26.7) and construction (minus 35.9 after minus 33.5).
The January results are disappointingly soft but consistent with the sluggish picture of the German economy painted by Wednesday's flash PMI results. While early days yet, there is now more reason for expecting a contraction in first quarter GDP. Moreover, with the German RPI at minus 35 and the RPI-P even weaker at minus 39, risks are building on the downside.
Current conditions shed 1.5 points to 87.0, a second successive drop and their lowest mark since July 2020. Expectations compounded December's 0.9 point fall with a 0.7 point decline to 83.5. However, while also well below their long-run average, this was only a 2-month trough following modest gains in September-through November last year.
Outside of manufacturing (minus 16.0 after minus 17.4), at a sector level sentiment deteriorated across the board. Hence, there were losses in services (minus 4.9 after minus 1.7), trade (minus 29.7 after minus 26.7) and construction (minus 35.9 after minus 33.5).
The January results are disappointingly soft but consistent with the sluggish picture of the German economy painted by Wednesday's flash PMI results. While early days yet, there is now more reason for expecting a contraction in first quarter GDP. Moreover, with the German RPI at minus 35 and the RPI-P even weaker at minus 39, risks are building on the downside.
Market Consensus Before Announcement
The business climate index, which at 86.4 in December was noticeably below the consensus for 87.8, is expected to rise modestly to 86.8 in January.
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.
