German Ifo Business Climate Shows Hope

Alan Penny

18 December 2019

3 min read

  • German Ifo Business Climate stronger than anticipated
  • “Soft data” showing confidence of business leaders

Early on Wednesday, the Germans released the Ifo Business Climate, which is a measure of how German business leaders around the country are behaving and feeling about the German economy. The measurement is a composite index based upon manufacturers, builders, wholesalers, services, and of course retailers. This is a good look into the psychology of the German business world, and therefore it gives you an idea as to what life is like “on the front lines” when it comes to the German economy.

The German economy is one of the main drivers of the entire European Union, so it is crucial to pay attention to what the Germans are doing

The German economy is one of the main drivers of the entire European Union, so it is crucial to pay attention to what the Germans are doing. How they see the local economy is so heavily dependent on exports into the European Union, the United States, China, and of course the UK. Not only is it important to see how Germany fits within the European Union, but it is also important to keep in mind that it is a heavily export laden market.

The announcement

The German Ifo Business Climate figures came out at 96.3, as opposed to the anticipated 95.6 number for November. This is a relatively strong number, and it does show that perhaps German business leaders are starting to look forward with a little bit more hope than they once did. The previous month was revised upward from 95.0 to 95.1 during the announcement.

This shows that business morale is rising a bit, and therefore it’s very likely that the German economy will pick up a bit. While this has not been a barn-burner of an announcement, it clearly has shown that the German business world is feeling a bit better than initially thought. With that being the case, more money will likely flow into the German economy and therefore could provide a little bit of a boost for the EU.

The main take away

The main take away is that the primary engine of the European Union is starting to wake up just a bit. As this is a report from the actual movers and shakers of the business world, it gives markets a bit of a chance to look at the possibility of the EU bouncing a bit.

As Germany goes, so goes the rest of the continent as it has been stated that Germany is as much as 80% of economic activity in the European Union. This is a market that should continue to lead the way for the rest of the European Union and it generally has a bit of a “knock-on effect” around the continent.

For example, as the DAX starts to pick up a bit of steam other indices around the continent pick up as well in a reach for a little bit more risk. This can be seen in other places such as the Ibex, and the MIB for example. Europe will continue to try to bottom out.

Written By
Alan Penny

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