IFO business climate decreased for the sixth consecutive month in October. The continued deterioration in the IFO survey does not bode well for a marked rebound in Q4 activity, following the likely stagnation in Q3 after -0.2% in Q2.

  • The IFO business climate decreased for the sixth consecutive month in October, down from 104.7 to 103.2, the lowest level since December 2012, while remaining above its long term average. According to the IFO institute, the German economy continues to lose steam.

  • The current situation index continued to decline, down 2 points to its lowest level since January 2013, though remaining above its long-term average. Conversely the expectations index declined further below its long term average, down to its lowest level since December 2012.

  • Business climate decreased in all sectors, with the exception of the wholesale trade. In the manufacturing sector, it declined by around 5 points to 1.5, to the lowest level since December 2012, recording the sharpest decline since April 2013. Excluding food, drink and tobacco, the relative manufacturing index even fell below its long-term average. According to the IFO institute and rather awkwardly, the export business expectations, however, was the only area in which manufacturers did express mild confidence. The business climate fell 0.2 point in the construction sector, down to the lowest level since October 2012. In retail trade, it fell from -2.1 to -4.6, standing below zero for the third month in a row.

  • The continued deterioration in the IFO survey does not bode well for a marked rebound in Q4 activity, following Q2 GDP contraction (-0.2% q/q) and Q3 likely stagnation given the poor data for industrial output over the quarter. In addition, there are some doubts regarding the robustness in private consumption as confidence in retail sector continued to decline in October.

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