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Economy in Brief

German IFO Business Climate Survey Surprises on the Up Side but Expectations Component Continues to Decline
by Louise Curley April 26, 2004

The IFO survey of the German business climate rose unexpectedly in April to 96.3 (2000=100) from 95.4 in March. However, the expectations component, appraising conditions six months ahead, continued to decline and was at 97.8 in April compared with 98.8 in March. The rise in the overall index was due entirely to the business confidence component, which is an appraisal of current conditions. It rose from 92.2 in March to 94.9 In April.

The recent decline in the euro, which has fallen by nearly 8% since the peak reached on February 17 of this year, has been a welcome turnaround from the persistent rise of about 55% in the euro from October 25, 2000 to February 17, 2004. That rise had had a dampening effect on world demand for German exports. Germany's main source of growth. Now with a somewhat lower euro and the improvement in growth in the United States and Asia, particularly China, since late last year the outlook for German exports has brightened.

In spite of the improved outlook for export growth, businessmen have become more cautious about the outlook for the next six months as there are few, if any, indications that domestic demand is improving.

IFO  Business Climate Survey  (2000=100) Apr 04 Mar 04 Apr  03 M/M % Y/Y %  2003 2002 2001
 Business Climate 96.3 95.4 88.4 0.94 8.94 91.7 89.4 92.1
  Business Confidence 94.9 92.2 86.6 2.93 9.58 88.4 85.3 93.1
  Expectations     97.8 98.8 90.3 -1.01 8.38 95.1 93.8 91.0
                 
Euro/US$   % Chg            
October 25, 2000 1.2068              
February 17, 2004 0.7791 54.9            
April 26, 2004 0.8448 -7.8            
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