ifo Business Climate in Eastern Germany Cools Dramatically (September 2022)
Sentiment among companies in eastern Germany deteriorated drastically in September. The ifo Business Climate Index for the entire regional economy fell to 85.2 points, down from 90.9 points in August. This is its lowest value since May 2020. A steep downward trend was apparent both in participating companies’ assessments of the current situation and in their outlook.
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In eastern German manufacturing, the ifo Business Climate Index saw a decidedly strong decline in September. The main reason for this was a sharp drop in expectations. These have fallen to their lowest level since the survey began. The current business situation was also assessed by the manufacturing companies surveyed as noticeably less good than in the previous month.
In the eastern German service sector, sentiment in September saw a drastic deterioration. Companies’ assessments of the current situation and business expectations both plunged compared with the previous month.
In eastern German trade, the sentiment barometer plummeted in September. The trading businesses surveyed assessed both their current situation and their outlook as considerably worse than a month earlier. The outlook reached a record low. Sentiment among retailers deteriorated massively, while it declined only slightly among wholesalers.
In eastern German construction, the business climate turned a lot cooler in September. The construction companies surveyed revised their assessments of the situation slightly downward. However, their business expectations fell markedly.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
ifo Business Climate Eastern Germany
(Index, 2015 = 100, seasonally adjusted)
| 09/21 | 10/21 | 11/21 | 12/21 | 01/22 | 02/22 | 03/22 | 04/22 | 05/22 | 06/22 | 07/22 | 08/22 | 09/22 | |
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Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Eastern Germany by Sector
(Balances, seasonally adjusted)
| 09/21 | 10/21 | 11/21 | 12/21 | 01/22 | 02/22 | 03/22 | 04/22 | 05/22 | 06/22 | 07/22 | 08/22 | 09/22 | |
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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.
