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Economy in Brief

German Ifo Index Is Showing Widespread Recovery
by Robert Brusca August 26, 2009

The month-to-month improvement in the all sector IFO diffusion index is the second largest since 1991. All sectors improved in the month. The manufacturing index is improving especially rapidly. The services sector has dug itself out of its declining phase and has posted not just an improvement but an outright gain in the month.

Still in relative terms, ranking sectors within each one’s range of actual variation finds construction as the relative strongest reading. Its -24 reading in August is above the mid point of its range and just below its average reading of -29 compared to a current reading of -24.

Retailing stands in the 44th percentile of its range. Wholesaling and services stand in the upper thirty percentiles of their respective ranges. While manufacturing is rising strongly it remains as the relative weakest sector in the bottom 29th percentile of its range.

The overall index stands at the 30th percentile of its range.

The strong rise in the MFG sector drove the improvement this month. as the MFG sector showed the greatest rise in the history of its index. Wholesale’s improvement ranks eighth. The improvement in services is the ninth largest in its shorter history since June 2001; the other series date from 1991.

The rebound in the IFO index is impressive. The levels of the various sectors fall short of being construed as a complete recovery, but they do show that a recovery process is in train. It is too soon to be able to guess accurately at when the economy will be on an even keel. But for now the improvement is rapid and in the right direction. The IFO confirms other reports that suggest that the recovery phase has begun.

Summary of IFO Sector Diffusion readings: CLIMATE
CLIMATE Sum Current Last Month Since Jan 1991*
  Aug-09 Jul-09 Average Median Max Min Range % range
All Sectors -19.7 -25.9 -9.4 -9.9 17.5 -36.2 53.7 30.7%
MFG -22.0 -29.7 -2.0 -0.3 27.5 -42.8 70.3 29.6%
Construction -24.0 -25.3 -29.3 -30.3 0.7 -50.1 50.8 51.4%
Wholesale -14.6 -22.5 -14.7 -16.3 23.9 -39.0 62.9 38.8%
Retail -15.0 -17.8 -16.0 -15.1 16.8 -40.4 57.2 44.4%
Services 1.4 -3.0 10.9 9.5 28.5 -14.5 43.0 37.0%
* June 2001 for Services
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