ifo Business Climate Eastern Germany: The Upward Trend Continues (August 2020)
Sentiment among eastern German companies continued to improve in August. The ifo Business Climate Index for the entire regional economy in eastern Germany climbed from 92.4 points to 94.6 points. This increase was mainly driven by the current business situation in August. At the same time, the companies surveyed raised their business expectations somewhat compared to the previous month. The picture was mixed across different sectors.
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In eastern German manufacturing, the business climate improved only slightly in August. The industrial companies surveyed rated their current business as much better. However, their outlook for the future has taken a hit and is becoming pessimistic again.
The recovery in the eastern German service sector is in full swing, with the ifo Business Climate Index continuing to surge. In August, the main reason for this was companies’ rising assessments of their current situation. The outlook for the service providers surveyed was also more positive.
In eastern German trade, developments were divided. While the Business Climate Index and the two subindices fell slightly in retail, sentiment among the surveyed wholesale companies rose noticeably. The increase here was driven by expectations.
In eastern German construction, the business climate was decidedly cooler in August. While the construction companies surveyed raised their assessments of the current situation slightly, their business expectations took a nosedive.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
ifo Business Climate Eastern Germany
(Index, 2015 = 100, seasonally adjusted)
| 08/19 | 09/19 | 10/19 | 11/19 | 12/19 | 01/20 | 02/20 | 03/20 | 04/20 | 05/20 | 06/20 | 07/20 | 08/20 | |
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Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Eastern Germany by Sector
(Balances, seasonally adjusted)
| 08/19 | 09/19 | 10/19 | 11/19 | 12/19 | 01/20 | 02/20 | 03/20 | 04/20 | 05/20 | 06/20 | 07/20 | 08/20 | |
| Eastern Germany | |||||||||||||
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| Construction |
Source: ifo Business Survey.
© ifo Institute
The ifo Business Climate Eastern Germany is based on approx. 1,700 monthly survey responses from firms in manufacturing, construction, wholesale, and retail. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterize their situation as “good,” “satisfactory,” or “poor” and their business expectations for the next six months as “more favorable,” “unchanged,” or “more unfavorable.” 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 favorable” and “more unfavorable.” The business climate is a transformed mean of the balances of the business situation and the expectations. For the purpose of calculating the index values, the transformed balances are all normalized to the average of the year 2015.
