Following the fifth consecutive monthly rise in February, when it reached the highest level since July 2011, the IFO business climate index decreased in March. The survey is still consistent with acceleration in the recovery pace in the first quarter.

  • In March, the IFO business climate index decreased from 111.3 to 110.7, thus standing not far from the level reached in February, the highest level since July 2011. The survey is still consistent with acceleration in the recovery pace in the first quarter. Indeed, the business climate index averaged 110.9 in Q1, a little more than two points above Q4 2013 average (108.8). This suggests that GDP accelerated from 0.4% q/q at the end of last year.

  • Business climate decreased in all sectors, with the exception of retailing. The fall was the most pronounced in the construction sector, where the business climate index came back into contraction zone, down from 0.6 in February to -3.5, the lowest level since October 2013. In the manufacturing sector, the business climate index fell from 19.8, the highest level since July 2011 to 19.1. Finally, the business climate index also decreased in the wholesale trade sector, down from 12.6 to 10.9.

  • The current situation index was up from 114.4 in February to 115.2, the highest level since April 2012. Conversely, the expectation index declined from 108.3 to 106.4. In particular, the crisis of the emerging economies and the events in Crimea were impacting the confidence of German firms, according to IFO Institute.This softening could signal somewhat slower growth in Q2 than in Q1, but nothing alarming yet.

  • The IFO survey confirms the PMI survey, released yesterday. The PMI composite output index was down from 56.4 the highest level since June 2011 to 55 in March, remaining above the 50-threshold for the tenth month in a row. In addition it stands markedly above the average of the other countries in the euro zone. On average for Q1, it was a little more than 2 points above its Q4 average.

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