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Ifo test shows bullish business conditions

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Business conditions improved again in December for the fourth month running and are now the rosiest for more than four years. In the construction sector business expectations and the assessment of current conditions are shooting up, with a risk of overheating in 2017. Encouragingly, the business climate in the manufacturing sector improved substantially in the fourth quarter of this year. This is likely to spell the end of the virtual stagnation in industrial production seen since 2014.

Allianz SE
Munich, Dec 19, 2016

The upbeat end to the year in the business surveys – the results of the Ifo test are in line with the purchasing managers’ index – points to a good start to 2017. The export engine, which sputtered intermittently in 2016 due to moderate growth in world trade, looks set to regain some momentum. The economy in almost all major global regions is now pointing upwards or has at least stabilized. In 2017 consumer demand will provide less of a fillip than in 2016, with higher inflation eating into purchasing power. But given the healthy shape of the labor market there is no cause for skepticism on this front either. We see strong quarter-on-quarter growth of 0.6% in the German economy in the fourth quarter of this year. In view of the acceleration at the turn of the year, we are now penciling in an increase in real gross domestic product of 1.7% in 2017 (previously 1.5%).

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