Summary: ifo business climate index up again in June; above expected figure; expectations, current conditions indices both up; economy “growing strongly at present”; expectations index implies euro-zone GDP growth in September quarter of 3.7%.
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 2020 survey, falling precipitously. The rebound which began in May of that year was almost as sharp but it was also characterised by a period of below-average readings which lasted until early 2021.
According to the latest figures released by the Institute, its business climate index increased to 101.8 in June. The reading was above the expected reading of 100.4 and 2.6 points above May’s final reading of 99.2. The average reading since January 2005 is just above 97.
“The mood in the German economy has once again improved significantly,” said Clemens Fuest, the president of the ifo Institute. “Optimism about the second half of the year also increased. The German economy is shaking off the corona crisis.”
The expectations index increased, rising from May’s figure of 102.9 to 104.0, also above the generally-expected figure of 103.6. The current situation index rose from 95.7 to 99.6.
German and French 10-year bond yields both declined a touch on the day. By the close of business, they had each slipped 1bp to -0.19% and +0.15% respectively.
ANZ economist Kishti Sen said the figures “reaffirmed the message from the PMI data that the economy is growing strongly at present.”
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.