Improvement in Climate for German Manufacturing Industry Overshadowed

The German business climate weakened again in August to 102.3 (2005=100) from 103.2  in July. It was for the fourth successive month of decline, but the decline was more moderate, 0.9%, compared with the 1.9%, 1.5% and 2.7% declines of the previous three months.  As measured by the IFO Institute, the business climate is based on the appraisals of current conditions and expectations for the next six months by the some 7000 respondents to their survey. The decline in the climate in August was due more to more pessimistic expectations than to a significant decline in current conditions.  Expectations for the next six months declined 1.36% from July to August while the appraisal of current conditions declined only 0.27%. The first chart shows the climate, current conditions and expectations as measured by indexes.

In addition to the  indexes, the IFO also presents data in the form of a percent balance of opinion.  The August data show considerable variation in the appraisals of the climate for the four industries--manufacturing, construction, wholesale trade and retail trade. The climate, as measured in terms of balance of opinion, in Wholesale Trade, deteriorated significantly from 3.8% in July to -2.1% in August.  The swing was even greater in retail trade, from 5.1% in July to -4.1% in August.  The balance of opinion on the climate for construction declined minimally from -6.7% in July to -6.9% in August.  The declines in these three industries overshadowed the one bright spot in the report:  the balance of opinion on the climate in the manufacturing industry actually improved slightly, from  -2.0% in July to -1.2% in August. 

Note:  Not all the results of the August survey are shown in the preliminary release published today.  The detailed series are embargoed until August 30th.