Ifo says the uncertainty among German companies rose significantly

Uncertainty among German companies over their business outlook for the months ahead has increased significantly. The Ifo measure of uncertainty (dispersion measure) increased by 6.2 points between May and September. Similarly, sharp increases over a comparable period were last seen during the global financial crisis in 2008 and 2009. According to Ifo estimates, greater uncertainty will curb industrial production by 0.4 percentage points this year and by another 1.3 percentage points in 2019. This is largely due to the surge in uncertainty seen among manufacturers and service providers. Uncertainty has also grown in the trade and construction sectors; but the increase was considerably smaller in these sectors. 

Uncertain times are characterised by the fact that companies and households find it harder to accurately predict the future. This makes them more cautious when taking decisions. Companies tend to postpone investments and hiring new staff, while households delay consumption decisions, and especially their purchases of durable goods.

Uncertainty is measured by the dispersion of company expectations. A homogeneous set of responses tends to point to a secure environment, while higher dispersion levels indicate greater uncertainty, because some of the companies surveyed have far more positive expectations than the average, while others take a far more negative view of the future.

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