Confidence Among German Industrialists Slips A Bit In February

German business confidence, which had been improving since March 2009, declined slightly in February. On a percent balance measure, which subtracts the percentage of respondents who are negative from those who are positive, confidence among German entrepreneurs fell to -10.3% from -9.0%. The climate measure is a combination of the business opinions regarding current conditions and expectations for the next six months.. The percent balance of business opinion on current conditions fell to -23.8% in February from -21.0% in January. Much of the decline can probably be attributed to the weather. Heavy snow fall and cold temperatures were particularly bad for construction and the distributive trades, both wholesale and retail.

In spite of the fact that the pessimists have exceeded the optimists regarding current conditions by more than 20% over the past several months, the proportion of German entrepreneurs who expect better condition six months ahead has been increasing. In December there was a slight excess of optimists over pessimists of 0.3%. In February the percent balance on expectations increased to 4.2% from 3.8% in January.

The increase in the proportion of business people who expect better conditions is in sharp contrast to the declines in the proportion of financial people who expect better conditions as revealed last Week in the ZEW survey. Not only do the business and financial communities sometimes differ in their appraisals of the future, but, they apparently differ in temperament, as shown in the attached chart which compares the percent balances on expectations of the two surveys. The financial community appears to have a positive bias and to have wide mood swings while the business community tends to have a negative bias and more restrained mood swings. In statistical terms--over entire history of each of the two series--the mean of the ZEW series is 27.1% and its standard deviation, 40.6%; the mean of the IFO series is -5.2% and its standard deviation, 10.6%