As with other surveys which produce an index, the ifo Institute’s business climate index is a composite index which combines German companies’ views of current conditions with their outlook for the next six months. It has similarities to consumer sentiment indices in the US and the business surveys in the EU.
According to the latest figures released by ifo, its business climate index “crashed” to 74.3 in April, lower than the expected reading of 80 and a severe deterioration from March’s 85.9. The average reading since January 2005 is just above 97 and the latest reading is the lowest on record.
Clemens Fuest, the president of the ifo Institute described sentiment at German companies as “catastrophic”. He went on to say, “This is the lowest value ever recorded and never before has the index fallen so drastically.”
Following a recession in 2009/2010, the index largely ignored the debt-crisis of 2010-2012 which flowed from it, remaining at average to elevated levels through to early-2020. Its relationship with euro-zone GDP growth is shown below.