What is The German Ifo Business Climate Index?

The German Ifo Business Climate Index is a survey by the Ifo Institute and is divided into two surveys The Ifo Business Climate Index which include manufacturing, construction, wholesaling and retailing and The  Ifo Business Survey of the service sector.

The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterise their situation as “good”, “satisfactory” or “poor” and their business expectations for the next six months as “more favourable”, “unchanged” or “more unfavourable”.

The balance value of the current business situation is the difference between the percentages of the responses “good” and “poor”; the balance value of the expectations is the difference between the percentages of the responses “more favourable” and “more unfavourable”.

The business climate is a transformed mean of the balances of the business situation and the expectations.

The  Ifo Business Survey of the service sector is based on ca. 2,500 monthly survey responses from firms in key segments of the tertiary sector, especially business-oriented segments (excl. distribution, financial services, Leasing, insurance and government).

The survey is conducted and calculated in the same way as the Ifo Business Survey of industry and trade. The indicator for the Business Climate in the service sector has not yet been incorporated into the If o Business Climate Index for industry and trade.

The index is compiled by the Ifo Institute for Economic Research.

How is Interpreted: A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

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