Germany Business Confidence August 2016


Business confidence unexpectedly drops considerably in August

Confidence among German businesses worsened but remained comfortably in optimistic territory in August. The business confidence index, elaborated by the Ifo Institute, fell from July’s 108.3 to 106.2 in August. The result marked a second consecutive moderation, the weakest reading in six months and contrasted market expectations of an uptick to 108.5.

According to the institute, the setback reflects that firms turned less optimistic about both future business development and the current business situation. In fact, the sub-indicators fell to the lowest value in six and seven months, respectively. The Ifo Institute commented on August’s print that “the German economy has fallen into a summer slump.” Sector-wise, sentiment fell in manufacturing, retailing and wholesaling sectors. It fell most in areas with strong ties to the UK, such as car production and chemicals, indicating that August’s fall in sentiment is a lagged reaction to the UK’s Brexit vote. Conversely, sentiment in the construction sector remained at a record-high.

FocusEconomics Consensus Forecast panelists expect gross fixed investment to expand 2.7% in 2016, which is down 0.1 percentage points from last month’s forecast. In 2017, the panel sees investment growth accelerating 1.9%.

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Germany Business Confidence Chart

Germany Business Confidence August 2016 0

Note: Ifo Business Climate Index, 2000=100.
Source: Ifo Business Survey.

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