ifo Business Climate Index for Germany
The ifo Business Climate Index is a highly-regarded early indicator of economic developments in Germany published on a monthly basis. Detailed results of the ifo Business Survey are published in the ifo Konjunkturperspektiven (in German).
Information on the ifo Business Climate Index
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The ifo Business Climate Index is the most important leading indicator for the development of the economy in Germany. In April 2018, the new ifo Business Climate Germany will replace the previous ifo index for industry and trade. The most important change: In addition to the manufacturing sector, the construction industry, wholesaling and retailing, the service sector was integrated. In addition, the aggregation method has been slightly modified and the base year for the index calculation from 2005 to 2015 has also been adjusted.
Publications
Sauer, Stefan / Klaus Wohlrabe
"Das neue ifo Geschäftsklima Deutschland"
ifo Schnelldienst 71 (07), 2018, 54–60.Sauer, Stefan / Wohlrabe, Klaus
"The New ifo Business Climate Index for Germany"
CESifo Forum 19 (2), 2018, 59–64.Sauer, Stefan / Weber, Michael / Wohlrabe,Klaus
"Das neue ifo Geschäftsklima Ostdeutschland und Sachsen: Hintergründe und Anpassungen"
ifo Dresden berichtet 25 (03), 2018, 20–24.
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How the ifo Business Climate is calculated with an example to illustrate how the balance values are calculated.
The ifo Business Climate is a widely observed early indicator for economic development in Germany. It is based on ca. 9,000 monthly survey responses of firms in manufacturing, service sector, construction, wholesailing 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", "satisfactorily" or "poor" and their business expectations for the next six months as "more favourable", "unchanged" or "more unfavourable". The replies are weighted according to the importance of the industry and aggregated. The balance value of the current business situation is the difference of the percentages of the responses "good" and "poor", the balance value of the expectations is the difference of the percentages of the responses "more favourable" and "more unfavourable". The business climate is a mean of the balances of the business situation and the expectations.
An example to illustrate how the balance values are calculated:
Of 100 responding firms, 40% appraise their business situation as satisfactory, 35% as good and 25% as poor. The firms that assessed their situation as satisfactory are considered to be "neutral" and do not affect the results of the business-situation appraisal. The two remaining percentage values (35 - 25) are now balanced. The resulting value of 10 percentage points is the business-situation appraisal, i.e. the first component of the business climate in the form of a balance. The six-month expectations are calculated the same way. From the situation and expectations appraisal the mean is formed, which is the ifo Business Climate balance for the individual month:
The ifo Business Climate balances can fluctuate between extreme values of -100 (i.e., all responding firms appraise their situation as poor or expect business to become worse) and +100 (i.e., all responding firms assessed their situation as good or expect an improvement in their business).
For calculating the index values of the business climate and its components - situation and expectation - the balances are all increased by 200 and normalized to the average of a base year (currently 2015).
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Seasonal Adjustment in the ifo Business Survey
Seasonal adjustment procedures are methods of eliminating annually recurring patterns in time series. The seasonal adjustment is a fundamental component of the calculation of the results series of the ifo Business Survey. Therefore, the ifo Institute uses the internationally widespread X-13ARIMA-SEATS procedure developed by the U.S. Census Bureau. Thus ifo’s seasonal adjustment procedure is in line with international standards. InsteadFurthermore, variables that show significant working day effects are subject to an additional working day adjustment.
The article by Stefan Sauer and Klaus Wohlrabe describes the basic concept of seasonal adjustment procedures, and goes on to describe the X-13ARIMA-SEATS method in greater detail. It focuses on various parameters such as season selection and the trend filter. These parameters can be individually selected for every time series and thus enable customized adjustments to the various conditions affecting individual time series. The article ends with an explanation of the characteristics of the time series and the advantages of the process.
Sauer, Stefan / Wohlrabe, Klaus
Die Saisonbereinigung im ifo Konjunkturtest – Umstellung auf das X-13ARIMA-SEATS-Verfahren
ifo Schnelldienst 68 (01), 2015, 32–42.The article by Steffen R. Henzel investigates the influence of the switch to in the seasonal adjustment procedure from the ASA-II procedure to the X-13ARIMA-SEATS method on the forecasting accuracy of the ifo indicators.
Henzel, Steffen R.
Prognosekraft des ifo Konjunkturtests – Einfluss der neuen Saisonbereinigung mit X-13ARIMA-SEATS
ifo Schnelldienst 68 (01), 2015, 59–63.
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Publications on the forecasting quality of the ifo Business Climate Index
The ifo Business Climate is a much considered indicator for the economic evolution in Germany. It is again and again the subject of scientific analyses in which the different qualities of the business climate are examined.
Lehmann, Robert, "The Forecasting Power of the ifo Business Survey", CESifo Working Paper No. 8291.
Wohlrabe, Klaus and Timo Wollmershäuser, "Über die richtige Interpretation des ifo Geschäftsklimas als konjunktureller Frühindikator", ifo Schnelldienst 70 (15), 2017, 42–46.
Wohlrabe, Klaus and Timo Wollmershäuser, "Der Zusammenhang zwischen Geschäftserwartungen und -lage im ifo Konjunkturtest", ifo Schnelldienst 69 (05), 2016, 42–45.
Litsche, Simon and Przemyslaw Wojciechowski, "Konjunkturtest im Fokus: Maschinenbau", ifo Schnelldienst 69 (05), 2016, 33–37.
Wojciechowski, Przemyslaw, "Konjunkturtest im Fokus: Rekordwerte in der Konjunkturumfrage im Bereich Dienstleistungen: Was treibt den Geschäftsklimaindikator in die Höhe?", ifo Schnelldienst 68 (22), 2015, 41–43.
Wojciechowski, Przemyslaw, "Konjunkturtest im Fokus: Information und Kommunikation", ifo Schnelldienst 68 (07), 2015, 57–60.
Sauer, Stefan and Klaus Wohlrabe, "Die Saisonbereinigung im ifo Konjunkturtest – Umstellung auf das X-13ARIMA-SEATS-Verfahren", ifo Schnelldienst 68 (01), 2015, 32–42.
Henzel, Steffen R., "Prognosekraft des ifo Konjunkturtests – Einfluss der neuen Saisonbereinigung mit X-13ARIMA-SEATS", ifo Schnelldienst 68 (01), 2015, 59–63.
Nierhaus, Wolfgang and Klaus Abberger, "Zur Prognose von konjunkturellen Wendepunkten: Dreimal-Regel versus Markov-Switching ", ifo Schnelldienst 67 (16), 2014, 21–25.
Henzel, Steffen and Klaus Wohlrabe, "Das ifo Beschäftigungsbarometer und der deutsche Arbeitsmarkt", ifo Schnelldienst 67 (15), 2014, 35–40.
Kudymowa, Evgenia and Klaus Wohlrabe, "Konjunkturtest im Fokus: Herstellung von Gummi- und Kunststoffwaren", ifo Schnelldienst 67 (07), 2014, 23–26.
Kudymowa, Evgenia and Klaus Wohlrabe, "Konjunkturtest im Fokus: Die Herstellung von Druckerzeugnissen; Vervielfältigung von bespielten Ton-, Bild- und Datenträgern", ifo Schnelldienst 67 (06), 2014, 31–35.
Sauer, Stefan and Christian Seiler, "Konjunkturtest im Fokus: Die Beurteilung der Lagerbestände im Handelsgewerbe", ifo Schnelldienst 67 (04), 2014, 41–44.
Henzel, Steffen and Sebastian Rast, "Prognoseeigenschaften von Indikatoren zur Vorhersage des Bruttoinlandsprodukts in Deutschland", ifo Schnelldienst 66 (17), 2013, 39–46.
Abberger, Klaus, Manuel Birnbrich and Christian Seiler, "Der »Test des Tests« im Handel – eine Metaumfrage zum ifo Konjunkturtest", ifo Schnelldienst 62 (21), 2009, 34–41.
Abberger, Klaus and Wolfgang Nierhaus, "Das ifo Geschäftsklima: Ein zuverlässiger Frühindikator", ifo Schnelldienst 60 (05), 2007, 25–30.
Abberger, Klaus and Wolfgang Nierhaus, "Das ifo Geschäftsklima und Wendepunkte der deutschen Konjunktur", ifo Schnelldienst 60 (03), 2007, 26–31.
Goldrian, Georg, Handbook of survey-based business cycle analysis, Ifo Economic Policy, 2, Elgar, Cheltenham, 2007, IX, 247.
Abberger, Klaus and Klaus Wohlrabe, "Einige Prognoseeigenschaften des ifo Geschäftsklimas - Ein Überblick über die neuere wissenschaftliche Literatur", ifo Schnelldienst 59 (22), 2006, 19–26.
Abberger, Klaus, "ifo Geschäftsklima und Produktionsindex im verarbeitenden Gewerbe", ifo Schnelldienst 59 (21), 2006, 42–45.
Sinn, Hans-Werner and Klaus Abberger, "Zur Prognosekraft des ifo Indikators", ifo Schnelldienst 59 (04), 2006, 35–36.
Goldrian, Georg, "Anmerkungen zu einer Untersuchung des prognostischen Gehalts von ifo Geschäfts- und ZEW-Konjunkturerwartungen", ifo Schnelldienst 54 (10), 2001, 33.