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Economy in Brief

German Business Types less Pessimistic about the Outlook than Financial Types
by Louise Curley August 28, 2007

The results of the IFO August survey of the opinions of industrialists, wholesalers and retail traders show that while business is slightly more confident about the current situation, it is somewhat less confident about the six month's outlook. Optimist on the outlook exceeded pessimist by 3.3%, down from 5.9% in July. The opinions of the business community, however, are much less pessimistic than those of the financial community, as revealed in last week's ZEW survey, that showed an excess of pessimists of 6.9% in August, down from an excess of optimists of 10.4% in July regarding the six month's outlook. The first chart compares the opinions of the business and financial communities. In general, the opinions of the financial community are much more volatile than those of the business community.

The IFO presents business expectations in terms of an index with a base year of 2000 as well as the percent balances of optimists over pessimists. The index for the entire period of its existence from January 1991 to the present is shown in the second chart, compared with the 1991-2006 average of the series. Although the expectations index has declined from 101.7 in July to 100.4 in August it is still significantly above the average.

GERMAN BUSINESS CONFIDENCE (IFO)  Aug 07 Jul 07  Aug 06  M/M Chg  Y/Y Chg  2006 2005 2004
Current Situation
  Index 2000=100 111.5 111.3 108.8 0.2 2.7 108.4 94.7 93.1
  Percent Balance 18.6 18.3 13.3 0.3 5.3 12.5 -14.2 -17.2
  Index 2000=100 100.4 101.7 101.6 -1.3 -1.2 102.7 96.3 97.8
  Percent Balance 3.3 5.9 5.5 -2.6 -2.2 7.9 -5.1 -2.0
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