German Ifo Comes in as Anticipated
- Business Climate measured
- Greatly respected survey due to large sample size
- Germany main driver of EU strength
To kick off the week on Monday, the Germans released the Ifo Business Climate figures for the month. The market expected 94.94 as the reading and got 95.
This is essentially as anticipated, and while the number did rise slightly, the Ifo Institute suggested that the orders were still “not satisfactory”.
The reading is important
The German Ifo Business Climate figures are very important to pay attention to, as they are one of the most respected surveys in the European Union. Remember, the German economy is roughly 82% of total strength when it comes to the European Union. As a result, it makes sense to keep a close watch on Germany more than anywhere else.
Ifo still not impressed
The Ifo still isn’t overly impressed by the results. This is because, although the numbers were as expected, they aren’t necessarily strong.
It’s a survey of roughly 7000 businesses across Germany to rate the relative level of current business conditions and expectations for the next six months. In the release, Information and Forschung suggested that, although the number was slightly higher, it was not enough to show significant changes in attitude among the Germans.
At this point, the situation in the European Union has stabilized slightly, but it hasn’t exactly turned the corner overall.
The main takeaway
The main takeaway from the survey is that, while things are starting to stabilize in Europe, we are still a long way away from turning the corner and from this becoming more of an optimistic situation.
This is probably due to a global slowdown. The German economy is highly sensitive to exports, and the US-China trade war seems to never end. This has a huge effect on Germany specifically, so it should be noted that there are quite a few problems externally.
This doesn’t even take into account Brexit, which still is a big question and will weigh upon German companies just as it affects companies in the UK.
The Ifo Business Climate reading suggests that we are probably looking at more of the same here, namely a flight of capital from the European Union into the United States. This is most clearly shown in the EUR/USD currency pair, but also in the relative strength of the S&P 500 and Dow Jones 30 when compared to various European stock indices such as the IBEX, CAC, and DAX.
Until Germany starts to show more signs of strength and optimism, it’s very likely that the European Union will continue to struggle in comparison to many other economies around the world.