Surprise Increase in German Business Confidence

23 August 2001

Bucking the downward trend uninterrupted since May 2000, Germany’s Ifo Index – a key business climate indicator and pulse of Eurozone growth prospects – rose to 89.8 in July, after hitting a five-year low of 89.5 in June.

Some see the minute but unexpected increase in Europe’s largest economy as a ray of sunshine amid the pervading gloom, although realists say it could be no more than a blip on the chart unless the reversal trend continues.

Another sector of the index, which charts future expectations within western German business, also rose from 93.5 in June to 95.0, implying that a further revival in the headline index could be on the cards, arresting the slowdown in the nation’s economic growth.

Comments merchant bank ABN Amro: “Although the current conditions index [the third index produced by Ifo] fell to 84.8 from 85.4, the expectations index rose to 95.0 from 93.5. The gap between the two is a good lead indicator of the headline index. So we could see more improvements in coming months.”

News source: Financial Times