Summary: ifo business climate index increases for third consecutive month; expectations index on par with late-2018; German economy recovering “step by step”; bond yields fall after disappointing household credit growth figure.
Following a recession in 2009/2010, 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.
According to the latest figures released by the Institute, its business climate index increased for a third consecutive month to 90.5 in July. The reading was above the expected reading of 89.3 and 4.2 points above June’s final reading of 86.3. The average reading since January 2005 is just above 97.
Its expectations index similarly increased, registering a result comparable with those from late-2018. It increased from June’s final figure of 91.6 to 97.0 in July, above the expected figure of 93.4.
“Companies were notably more satisfied with their current business situation. They are also carefully optimistic about the coming months,” said Clemens Fuest, President of the ifo Institute. “The German economy is recovering step by step.”
French and German 10-year bond yields fell on the day after EU household credit growth figures did not meet expectations. By the close of business, 10-year German and French bond yields had both lost 4bps to -0.49% and -0.19% 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.