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Analysis

German Ifo business climate index

by Gabriel Stein

Mon 28 Jul 2014

German Ifo business climate index Enlarge Chart loading Image

What the chart shows: The chart shows the Ifo Business Climate Index (index 2005=100) as well as the difference between the two main sub-indices, Current situation and Business expectations

Why the chart is important: German business confidence remains strong by historic standards. However, as noted in a previous Chart of the Week (25th February), the weaker future expectations are beginning to take a toll of current sentiment as well and the overall index has now been falling since April.  This confirms other data that the German economy is likely to have slowed sharply in Q2 (flash data out 14th August).

More worryingly, given the leading properties of business confidence, the implication is that the German economy could struggle to regain traction in the second half of the year. However, it is possible that the weaker Ifo also reflects fears of the impact on Germany of anti-Russian sanctions; it is significant that the July purchasing managers indices moved in the opposite direction of the Ifo, a relatively rare occurrence.

Chart and comments provided by Oxford Economics www.oxfordeconomics.com