ifo Business Climate in Eastern Germany Declines Significantly (July 2021)
Sentiment among companies in eastern Germany cooled significantly in July. The ifo Business Climate Index for the entire regional economy fell to 101.4 points, down from 102.6 points in June. Compared to the previous month, companies’ assessments of the current situation jumped even as their expectations plummeted.
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In eastern German manufacturing, the business climate brightened noticeably in July. Manufacturers assessed both their current business and their expectations as better than in the previous month.
The ifo Business Climate Index saw a clear dip in the eastern German service sector in July. The service providers surveyed raised their overall assessments of the current situation substantially compared to the previous month, but at the same time, their expectations tumbled.
The mood in eastern German trade worsened tangibly in July: in retail it was mainly current business that was rated less favorably, while in wholesale it was expectations that fell exceedingly sharply.
In eastern German construction, the business climate was a touch cooler in July. The construction businesses surveyed rated their current business somewhat less positively, and lowered their expectations a little compared to the previous month.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
ifo Business Climate Eastern Germany
(Index, 2015 = 100, seasonally adjusted)
| 07/20 | 08/20 | 09/20 | 10/20 | 11/20 | 12/20 | 01/21 | 02/21 | 03/21 | 04/21 | 05/21 | 06/21 | 07/21 | |
| Climate | |||||||||||||
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| Expectations |
Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Eastern Germany by Sector
(Balances, seasonally adjusted)
| 07/20 | 08/20 | 09/20 | 10/20 | 11/20 | 12/20 | 01/21 | 02/21 | 03/21 | 04/21 | 05/21 | 06/21 | 07/21 | |
| Eastern Germany | |||||||||||||
| Manufacturing | |||||||||||||
| Service sector | |||||||||||||
| Trade | |||||||||||||
| 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.
