Results of the March 2017 Ifo Business Survey
Ifo Business Climate Index Rises
Sentiment among German managers continues to improve this month. The Ifo Business Climate Index rose to 112.3 points in March from 111.1 (seasonally adjusted) points last month, reaching its highest level since July 2011. The upwards trend in assessments of the current business situation continues unabated. The business outlook for companies also improved again this month. The upswing in the German economy is gaining impetus.
In the manufacturing sector, the index also rose to its highest level since July 2011. This was primarily due to markedly more optimistic expectations on the part of manufacturers. Assessments of the current business situation also improved. This very positive development was partly driven by a renewed upturn in demand. Prices continued to follow an upwards trend. The index rose in nearly all key segments of manufacturing.
After last month’s sharp increase, the business climate index in wholesaling deteriorated. Assessments of both the current business situation and expectations were scaled back. In retailing the index rose. Retailers assessed their business situation far more favourably. The short-term business outlook, by contrast, clouded over slightly.
After marked declines in recent months, the business climate index in the construction sector rose in March. Assessments of the current business situation reached their highest level since 1991. Contractors are also more 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|| 106.7|| 106.9|| 108.0|| 108.8|| 108.4|| 106.3|| 109.5|| 110.5|| 110.5|| 111.0|| 109.9|| 111.1|| 112.3|
|Situation|| 113.6|| 113.6|| 114.5|| 114.9|| 115.0|| 113.1|| 114.9|| 115.2|| 115.7|| 116.8|| 117.0|| 118.4|| 119.3|
|Expectations|| 100.3|| 100.6|| 101.8|| 103.1|| 102.2|| 100.0|| 104.3|| 106.0|| 105.4|| 105.6|| 103.2|| 104.2|| 105.7|
|Source: Ifo Business Survey |
|Ifo Business Climate Germany by Sector (Balances, seasonally adjusted)|
|Trade and Industry|| 6.6|| 6.9|| 9.0|| 10.6|| 9.8|| 5.8|| 11.9|| 13.9|| 13.8|| 14.9|| 12.7|| 15.0|| 17.4|
|Manufacturing|| 5.5|| 7.1|| 8.4|| 11.1|| 10.0|| 6.4|| 13.2|| 16.8|| 14.9|| 15.6|| 14.0|| 16.8|| 21.0|
|Construction|| 0.0|| 0.9|| 3.8|| 4.9|| 5.6|| 5.7|| 9.3|| 10.1|| 11.0|| 13.1|| 10.6|| 7.8|| 9.4|
|Wholesaling|| 13.2|| 11.0|| 13.3|| 15.4|| 12.0|| 6.0|| 11.8|| 10.0|| 15.2|| 18.0|| 14.7|| 22.3|| 18.4|
|Retailing|| 10.8|| 7.1|| 11.3|| 8.2|| 10.3|| 2.8|| 8.0|| 7.9|| 9.4|| 9.5|| 5.9|| 4.5|| 6.4|
|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.