September IFO Survey Up Again

At 107.7 in September the IFO business climate index rose for the fifth consecutive month. The expectations index increased for the fourth month in a row, up to the highest level since February 2013. Conversely the current conditions index decreased somewhat following its sharp improvement in August.

In September, the IFO business climate index increased for the fifth consecutive month. It was up 0.1 point from 107.6 to 107.7, reaching the highest level since April 2012. Business climate improved in all sectors with the exception of the whole sale trade sector and construction. As regard the wholesale sector a correction was expected following the sharp rise in August (+7.8 points, up to the highest level since May 2012). Concerning the construction sector, the business climate was back to the lowest level since December last year but nevertheless remained above its long-term average. Finally, the manufacturing business climate index was up by 0.7 point to 11.9, the highest level since April 2012.

The current situation index was down 0.6 point to 111.4. This fall was not a total surprise following the marked rise recorded in August (+1.9 points up to 112 the highest level since June last year). In addition, the survey was conducted ahead of German general elections and this probably weighed on business confidence.

Conversely the expectation index was up 0.9 point, increasing for the fourth month in a row to the highest level since February 2013. Firms expect further impulses from export business, according to IFO Institute.

The IFO survey confirms the PMI survey, released earlier this week. The PMI composite headline index rose from 53.4 to 53.8. It thus remained above the 50-threshold for the fifth month in a row, standing at the highest level since January 2013 and pointing to accelerating activity in Germany.

Following Q2 marked rebound, mainly thanks to a catch-up effect following stagnation in Q1, activity should “normalize and stabilize” in the rest of the year, when compared to Q2 record growth (+0.7% q/q). Indeed exports will continue to increase relatively modestly while domestic demand should strengthen gradually.

BY Caroline NEWHOUSE

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