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Germany Business Confidence July 2018

Germany: Business confidence edges down in July on less upbeat business expectations

Despite more positive economic data towards the end of the second quarter, in July business sentiment continued to ease, with the Ifo Business Climate Index decreasing slightly to 101.7 points from 101.8 points in June. The drop reflected a scaling back of firms’ business expectations, while businesses were slightly more optimistic about the current state of the economy. Although the sentiment indicator remained above the 100-point mark separating optimism from pessimism in the private sector, July’s figure recorded the lowest print since March 2017.

Sectoral data showed a mixed result: Sentiment improved in two sectors, while it deteriorated in the other two. Manufacturers were less upbeat in July on the back of a deterioration in their assessment of the current business situation. As a result, the overall index reading for the manufacturing sector dropped for the sixth consecutive month, although business expectations remained slightly optimistic. Sentiment levels in the trade sector also fell, as firms were more optimistic about the current situation but more pessimistic about the business outlook in the six months ahead.

Conversely, confidence among firms in the services and construction sectors rose. Stronger demand resulted in services firms assessing both the current and the future business situation in a more favorable light. Sentiment hit a new record high in the construction sector, as businesses’ outlook on the current business situation and future expectations improved.

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