There was a significant deterioration in the ZEW business expectations July index, which increased doubts surrounding manufacturing prospects, but the IFO data suggests strong resilience within the industrial sector, especially as the survey is based on replies from a large sample of 7,000 companies.
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In a report, the German research institute, Ifo said its Business Climate Index dropped to a seasonally adjusted 108.3 this month from a reading of 108.7 in June, above forecasts for a decline to 107.5.
“This was due to far less optimistic business expectations on the part of companies”. In contrast, the assessments of the current business situation have improved from the respondents, as the German economy remains resilient.
Meanwhile, the expectations index fell to 102.2 from 103.1 in June, beating expectations of 101.2, while the index of current conditions nudged up to 114.7 from 114.6, ahead of estimates of 114.0.
The Ifo index didn’t plunge as sharply as investor sentiment in the ZEW survey released on July 19, buoyed by respondents’ faith in domestic demand.
Fuest told reporters on Monday that the British decision to leave the European Union would cost the German economy 0.1 percent of gross domestic product in 2016, with the long-term impact of the move hard to gauge.
But retailers and construction firms were looking to the future with continued confidence.
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But “given that the United Kingdom accounts for around seven percent of all German exports, this damage still looks manageable”, Brzeski said. The index combines the views of business executives on how things are now and on how they see the coming months.
