| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Business Climate | 86.0 | 87.8 | 85.5 | 85.7 |
| Current Conditions | 87.0 | 88.1 | 86.9 | |
| Business Expectations | 85.1 | 87.5 | 84.1 | 84.4 |
Highlights
Ifo's March survey points to an improvement in economic conditions at quarter-end. At 87.8, the overall climate indicator was up 2.1 points versus a marginally firmer revised February reading, its largest increase since March last year and its highest mark since June 2023. It was also nearly 2 points above the market consensus.
Current conditions advanced 1.2 points to 88.1, their first gain since November albeit only a 3-month peak. Expectations again fared much better, climbing fully 3.1 points to 87.5, their steepest rise since November 2022 and their best level since May last year.
All of the main sectors posted an improvement in sentiment with manufacturing up some 7.1 points at minus 10.0, trade up 7.9 points at minus 22.9, services up 4.3 points at 0.3 and construction up 1.9 points at minus 33.5.
In sum, the March results are clearly stronger than anticipated and probably rather more optimistic than the flash PMI survey released yesterday. Nonetheless, both reports are still historically soft and leave the German economy on course to slide into recession this quarter. Even so, today's update lifts the German RPI to 21 and the RPI-P to a very solid 50, at least raising the chances that the current downswing may be somewhat shallower than generally forecast.
Current conditions advanced 1.2 points to 88.1, their first gain since November albeit only a 3-month peak. Expectations again fared much better, climbing fully 3.1 points to 87.5, their steepest rise since November 2022 and their best level since May last year.
All of the main sectors posted an improvement in sentiment with manufacturing up some 7.1 points at minus 10.0, trade up 7.9 points at minus 22.9, services up 4.3 points at 0.3 and construction up 1.9 points at minus 33.5.
In sum, the March results are clearly stronger than anticipated and probably rather more optimistic than the flash PMI survey released yesterday. Nonetheless, both reports are still historically soft and leave the German economy on course to slide into recession this quarter. Even so, today's update lifts the German RPI to 21 and the RPI-P to a very solid 50, at least raising the chances that the current downswing may be somewhat shallower than generally forecast.
Market Consensus Before Announcement
Though edging 3 tenths higher, February's 85.5 was the second lowest business climate reading since October 2022 and historically very weak. March's consensus is 86.0.
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.
