Summary: ifo business climate index increases for fourth consecutive month; in line with expectations; German economy on road to recovery”; German, French bond yields rise noticeably; economists express some doubts about recovery’s sustainability.
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, falling precipitously. A rebound began in May.
According to the latest figures released by the Institute, its business climate index increased for a fourth consecutive month to 92.6 in August. The reading was broadly in line with the expected reading of 92.2 and 2.2 points above July’s final reading of 90.4. 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 July’s final figure of 96.7 to 97.5 in August, a little below the expected figure of 98.0. The current situation index rose from 84.5 to 87.9.
A month ago, Clemens Fuest, the president of the ifo Institute had described the German economy as “recovering step by step.” In this latest report, he reinforced this view, stating, “The German economy is on the road to recovery.”
German and French 10-year bond yields increased noticeably. By the close of business, the German 10-year bund yield had gained 5bps to -0.44% and the French OAT yield had jumped by 7bps to -0.13%.
ANZ senior economist Catherine Birch sounded a note of caution. “Overall, Germany’s economy is steadily improving and the question is now whether the recent gains will be able to be maintained.”