Results of the February 2017 Ifo Business Survey
Ifo Business Climate Index Rises
Sentiment among German managers improved this month. The Ifo Business Climate Index rose to 111.0 points in February from 109.9 (seasonally adjusted) points last month. Assessments of the current business situation reached their highest level since August 2011. Companies also expressed greater optimism about the months ahead. After making a cautious start to the year, the German economy is back on track.
In the manufacturing sector, the index rose. Manufacturers were far more satisfied with their current business situation. After deteriorating in January, the business outlook also brightened slightly. Current demand and the number of incoming orders picked up markedly. This positive development was mainly driven by food producers, as well as mechanical and electrical engineering firms.
In wholesaling, the business climate improved. Assessments of both the current business situation and expectations rose. In retailing, by contrast, the index fell. Retailers assessed their business situation as less favourable. Despite an improvement in the short-term business outlook, retailers remain cautious.
The business climate in the construction sector deteriorated, but nevertheless remained favourable. Two thirds of contractors reported constraints due to bad weather in February. Contractors scaled back their very good assessments of the business situation. They are also less optimistic about the months ahead.
Prof. Dr. Clemens Fuest
President of the Ifo Institute
Results of the Ifo Business Survey in Germany in all details (in German)
Ifo Business Climate Germany (Index)
Business Situation and Expectations by Sector (Balances)
Ifo Business-Cycle Clock Manufacturing Industry
Ifo Business-Cycle Clock Industry and Trade
Ifo Business Cycle Traffic Lights Industry and Trade
|Ifo Business Climate Germany (Index, 2005 = 100, seasonally adjusted)|
|Climate|| 105.7|| 107.1|| 106.9|| 107.9|| 108.8|| 108.4|| 106.4|| 109.5|| 110.5|| 110.4|| 111.0|| 109.9|| 111.0|
|Situation|| 112.9|| 114.1|| 113.5|| 114.4|| 114.8|| 114.9|| 113.0|| 114.8|| 115.2|| 115.7|| 116.7|| 116.9|| 118.4|
|Expectations|| 99.0|| 100.4|| 100.6|| 101.8|| 103.1|| 102.2|| 100.1|| 104.5|| 106.0|| 105.4|| 105.5|| 103.2|| 104.0|
|Source: Ifo Business Survey |
|Ifo Business Climate Germany by Sector (Balances, seasonally adjusted)|
|Trade and Industry|| 4.6|| 7.2|| 6.8|| 8.8|| 10.6|| 9.7|| 5.9|| 12.0|| 13.9|| 13.7|| 14.8|| 12.6|| 14.7|
|Manufacturing|| 3.6|| 6.3|| 7.0|| 8.3|| 11.0|| 9.9|| 6.5|| 13.3|| 16.8|| 14.8|| 15.4|| 13.9|| 16.5|
|Construction|| 0.6|| -0.2|| 0.8|| 3.7|| 4.9|| 5.6|| 5.8|| 9.4|| 10.2|| 11.0|| 13.1|| 10.8|| 7.6|
|Wholesaling|| 12.2|| 13.7|| 11.0|| 13.3|| 15.4|| 11.9|| 6.0|| 11.7|| 9.9|| 15.2|| 17.9|| 14.7|| 22.2|
|Retailing|| 4.7|| 11.1|| 7.0|| 11.2|| 8.2|| 10.3|| 2.8|| 8.0|| 7.9|| 9.4|| 9.4|| 5.8|| 4.4|
|Source: Ifo Business Survey |
The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterise their situation as “good”, “satisfactory” or “poor” and their business expectations for the next six months as “more favourable”, “unchanged” or “more unfavourable”. The balance value of the current business situation is the difference between the percentages of the responses “good” and “poor”, the balance value of the expectations is the difference between the percentages of the responses “more favourable” and “more unfavourable”. The business climate is a transformed mean of the balances of the business situation and the expectations. For the purpose of calculating the index values, the transformed balances are all normalized to the average of the year 2005.
Monthly movements of the Ifo Business Climate Index for Industry and Trade can be transformed with the help of Markov Switching Models into probability statements for the two cyclical regimes expansion or contraction. The Ifo Business Cycle Traffic Lights provides the monthly regime probabilities for the expansion phase. The probabilities signal an economic expansion (green lights) insofar as they exceed the 66% mark; contractions insofar as they are under the 33% mark (red lights); or indifference (yellow lights) when in the range in between. This indifference interval can be interpreted as a buffer zone between the regimes expansion and contraction, in which particularly great uncertainty exists about the state of the economy.