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Economy in Brief

German Ifo Business Climate Index Turns Positive in January; Prospects in France Modestly Favorable
by Carol Stone January 25, 2006

While business in the UK appears to be flagging, as reported here yesterday by Louise Curley, on the Continent, affairs look more favorable. Ifo, an independent research institute in Germany, relates today that its Business Climate Index for January moved up to +3.0 from -1.7 in December. This was only the 21st positive monthly reading in just over 15 years of survey data. The two components, the Business Situation and Business Expectations also improved, with Expectations at +10.8 from +2.6 last month. The Situation measure, a gauge of current conditions, remained negative, but less so, at -4.5 from -6.0 in December. Among types of businesses, manufacturers, construction companies and retailers participated in the advance. Wholesalers' sentiments eroded a bit, from -0.8 to -2.1, but these were still the best two readings in this sector since May 2000.

In a similar survey covering manufacturers and other industrial firms in France, sentiments changed little in the month, but their modest move pushed their diffusion index to +1, the first positive reading since November 2004. Conducted by INSEE, the French Government statistical office, this monthly business survey, measuring the outlook for the trend in industrial production, is much more variable than the Ifo data in Germany. So less significance can be taken from this latest swing in the French figures. Even so, French managers are considerably more sanguine about manufacturing prospects than they were through much of 2005. Foreign orders look to be a major ingredient.

Indexes, 2000=100, SA Jan 2006 Dec 2005 Nov 2005 Year Ago 2005 2004 2003
Germany: Ifo Business Climate 102.0 99.6 97.8 96.2 95.6 95.7 91.7
  Diffusion % +3.0 -1.7 -5.3 -8.6 -9.7 -9.6 -17.5
Business Situation 100.4 99.6 97.8 95.1 95.4 94.0 88.3
  Diffusion % -4.5 -6.0 -9.5 -14.7 -14.2 -17.0 -27.9
Business Expectations 103.6 99.6 97.8 97.2 95.8 97.4 95.1
  Diffusion % +10.8 +2.6 -1.1 -2.2 -5.1 -1.8 -6.5
France: INSEE Business Survey* 1 -2 0 -5 -12 +5 -29
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