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Economy in Brief

German Firms Cut Back Their Assessment and Expectations
by Robert Brusca October 16, 2008

The German Chamber of Industry and Commerce survey (DIHK) shows a steady if not rapid deterioration in the current assessment and in the expectations for the period ahead. Economic conditions slipped from a reading of +24 in Q2 to +17 in Q4 dropping their standing to the 69th percentile from the 80th percentile previously. Business expectations dropped from +6 to -9 as the percentile standing fell to the 41st percentile from the 76th percentile, a sharp drop off and a move away from a nice position above the range midpoint to substantially below it.

Investment intentions have also crossed into negative territory, dropping from +6 to -2. But in terms of the percentile standing, the drop off is not as severe as the percentile fall from the 78th to the 60th percentile still leaves a firm reading in place not one that is below average. A modest negative number is still above the mid-point response for German firms’ capital spending intentions. Hiring intentions also fell to a negative reading from +6 in Q2 2008 to -3 in Q4 2008. Similarly the percentile ranking fell from the 86th to the 66th percentile for hiring plans.

The survey was conducted in late September and early October so some of the worst of the recent financial markets events were probably not taken into consideration in the survey. However in mid and late September the stock market was extremely choppy and volatile. It is unclear how much of this affected respondent expectations and assessments.

In the survey German firms also expressed more concerns about foreign growth and with that diminished expectations for German exports.

DIHK-Balance of Economic Opinion
  Net Balance Readings Change Range Q4'91 Percentile
  Q4-08 Q2-08 Q1-08 Yr Ago 2-Yr 3-Yr Q4-08 Q2-08
Economic Conditions 17 24 30 -14 -7 17 69.4 80.6
Business Expectations -9 6 10 -24 -18 -12 41.1 67.9
Export Expectations 14 26 36 -25 -21 -18 54.8 74.2
Investment Intentions -2 6 9 -15 -9 4 60.9 78.3
Hiring Intentions -3 6 7 -12 -3 11 66.7 86.7
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