German Ifo Index

By IBTimes Staff Reporter | January 26 2010 5:11 AM

The German business climate improved further in January to 95.8 (December: 94.6), thus beating market expectations. The current situation brightened to 91.2, compared to 90.4 in December, and the companies' expectations for the coming six months have turned more optimistic, reaching 100.6 (December: 98.9).

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The business climate has improved in almost all sectors (commercial business, manufacturing business, construction business and wholesale). Only the assessment in retail trade weakened compared to December.

Assessment: The expectation component of the Ifo business climate could jump above 100, thus outperforming the expectation component of the ZEW (see chart). The total Ifo index broke the 95 threshold, which should indicate that the German economy has returned to its growth path. Indeed, some rumors are on the market that the German government will revise the forecast for German GDP growth for 2010 from +1.2% to +1.5%. At the same time, we should be aware that this means a recovery from very poor levels (GDP 2009: -5%). Therefore, it is too early for disproportionate optimism. In fact, the bond market was not impressed by today's positive release and the euro barely showed any reaction against the US dollar.