Ifo business climate points to strong second quarter growth

In contrast to the slight dip in the purchasing managers’ index, the Ifo business climate index climbed to a new record level in July. In our experience, the Ifo index is an extremely reliable economic indicator. This suggests that the buoyant economic growth seen in the first quarter (+0.6% q-o-q) was maintained in the second quarter as well, particularly as hard economic indicators such as exports, retail sales and industrial production in the first two months of the second quarter also flag up dynamic business activity.  We estimate seasonally-adjusted quarterly growth of 0.5 - 0.7% in the second quarter.

Particularly striking is the steep rise to an all-time high in the assessment of current conditions in the manufacturing sector since fall 2016, having previously practically stagnated for three years. It is also surprising that business expectations in manufacturing for the coming six months have improved although the rise in the euro tends to undermine industrial price competitiveness. The world economy is evidently providing a hefty boost. The fairly steep drop in the retailing business climate should not be overrated as monthly swings are the rule here and this sub-index remains at a high level. The breadth of the upswing is also reflected in the ongoing rise in the business climate in wholesaling and construction.


Rolf Schneider

Allianz SE
Phone: +49 69 24431 5790

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