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Economy in Brief

The German IFO Institute Confirms the Rise in Business Confidence Shown Earlier by the ZEW Measure
by Louise Curley June 27, 2005

German business confidence improved in June after having declined in the four previous months according to the IFO Institute's survey of some 7,700 entrepreneurs. The data confirm the slight improvement in confidence shown by the institutional investors and analysts in the Zew Index published last week. The decline in the Euro has been cited in both cases as a cause of improved confidence as has the prospect of a Fall election that could lead to more business friendly economic and social reforms. The impact of the recent rise in the price of oil, however, has yet to be reflected in the confidence measures.

The preliminary results of the IFO survey published today include the business climate, the current situation and the expectations for six months ahead indexes. In addition, the percentage balances of opinion on the climate for manufacturing, wholesale, retail trade, construction and total businesses are published. The complete data, of indexes and percentage balances for detailed industries, will be published later in the week. The data released so far show that balance of opinion in the manufacturing, wholesale and retail trade areas has become less negative in June, but has become more negative in the construction industry.

The Business Climate index reflects both current conditions and expectations. In June both current conditions and expectations rose slightly, but while current conditions were also above June, 2004, expectations were 1.5% below the year ago figure. The indexes of current conditions and expectations of conditions six months ahead are plotted in the attached chart.

Germany Jun 05 May 05 Jun 04 M/M % Y/Y %  2004    2003  2002
Indexes 2000=100                
 Business Climate 93.3 92.9 94.7 0.43 -1.48 -5.7 91.7 89.4
 Current Conditions 93.7 93.4 93.3 0.32 0.43 94.0 88.4 85.3
 Expectation 6 mo, ahead 92.9 92.3 96.1 0.43 -1.48 97.4 95.1 93.9
Percent Balances       M/M dif Y/Y dif      
Total -14.2 -15.1 -11.5 0.9 -2.7 -9.5 -17.5 -21.9
Manufacturing -5.3 -5.6 3.0 0.3 -8.3 4.5 -7.9 -10.2
Retail Trade -21.0 -25.8 -29.8 4.8 8.8 -27.6 -25.4 -40.1
Wholesale Trade -18.2 -22.0 -22.5 3.8 4.3 -17.2 -24.5 -29.8
Construction -42.1 -37.6 -42.8 -4.5 0.7 -42.6 -42.8 -44.5
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