Summary: ifo business climate index slips in October; follows five consecutive months of rises; a little under expectations; German businesses “becoming increasingly worried”.
Following a recession in 2009/2010, the ifo Institute’s business climate index largely ignored the European debt-crisis of 2010-2012, remaining at average-to-elevated levels through to early-2020. However, the index was quick to react in the March survey, falling precipitously. The rebound which began in May was almost as sharp.
According to the latest figures released by the Institute, its business climate index slipped back to 92.7 in October after five months of consecutive increases. The reading was a little below the expected reading of 93.0 and 0.5 points below September’s final reading of 93.2. The average reading since January 2005 is just above 97.
The expectations index also lost ground, falling from September’s figure of 97.4 to 95.0 in October, also below the expected figure of 96.5. However, the current situation index rose from 89.2 to 90.3.
“Companies are considerably more sceptical regarding developments over the coming months. In contrast, they gave a slightly more positive assessment of their current situation than last month. In view of rising infection numbers, German business is becoming increasingly worried,” said Clemens Fuest, the president of the ifo Institute.
German and French 10-year bond yields remained stable on the day. By the close of business, German and French 10-year bond yields finished unchanged at -0.58% and -0.30% respectively.
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 such as the ones produced by The Conference Board and the University of Michigan.
It also displays a solid correlation with euro-zone GDP.