Ifo business climate shows marked improvement

Ifo business climate shows marked improvement

Improved sentiment in the german economy raises hopes of a better economic situation. According to the ifo institute in munich, the business climate surveyed by the institute rose by 1.2 points to 96.3 points in december.

This is the highest level for half a year and the second increase in a row. Analysts had expected an increase, but only to 95.5 points.

"The german economy is entering the new year with greater confidence," commented ifo president clemens fuest. The companies surveyed assessed both the current situation and their expectations for the coming six months as better.

However, developments in the individual sectors were mixed: while sentiment was better in industry and among service providers, it dipped in trade and construction. The ifo business climate is based on a survey of around 9,000 companies.

Bank economists commented cautiously on the figures. The business climate has strengthened hopes of an improvement in the economy in the coming year, according to commerzbank economist ralph solveen. However, the industry continues to give cause for concern. A turnaround signal is not discernible here. The industry has been suffering for a long time from a number of developments, including the weak global economy and the numerous trade disputes.

Domestic demand, on the other hand, is largely stable and is supporting overall economic development. This is primarily due to the extremely robust german labor market and significant increases in collectively agreed wages. The latter, in conjunction with moderate inflation, ensure that consumers are left with real income growth even after taking into account price increases. This strengthens consumption.

Carsten brzeski, chief economist for germany at the bank ING, also commented cautiously. Although the worst seems to be over for the german economy. However, it is unclear how things will develop now. This year, growth in the german economy has slowed down noticeably, but without a recession occurring. Bank economists and research institutes expect the economic situation to improve in the coming year. But growth rates are likely to remain low.