German Business Climate Index Continues to Fall

22 November 2001

Hopes that Germany’s bellwether Ifo index of business climate would improve – or at least halt its decline – were dashed Wednesday when the data for October indicated a fall from 85.0 in September to 84.7, its lowest for eight years.

Looking ahead, the Munich-based Ifo research institute offered no greater cheer, with the business expectations index easing downward from 90.5 in September to 89.6. The one ray of light penetrating the gloom is that the October index does not reflect the half-point interest rate cut by the European Central Bank earlier this month.

The Ifo index is in marked contrast to last week’s survey from the Mannheim-based ZEW Institute. This painted a brighter picture, its German economic sentiment indicator rising from October’s +9.8 to +13.1.

But despite this data dichotomy, the balance is further tilted towards gloom by figures released today (Thursday) by the German government statistics office. These show a shrinkage in gross domestic of 0.1% in the three months to September, a marginally worse performance than analysts had predicted.

After a stagnant performance in the first quarter, Germany now teeters on the brink of a technical recession – categorized as two successive quarters of negative growth.

News sources: Financial Times; BBC Online Business News (UK)