ifo Business Climate Index Eastern Germany Falls Further (July 2023)

Sentiment among companies in eastern Germany fell once again in July. The Business Climate Index for the entire regional economy dropped from 93.4 to 91.4 points. This means that the barometer of business sentiment fell for the third time in a row. Survey participants were noticeably less satisfied with their current business and slightly scaled back their business expectations for the coming six months.

Download

In eastern German manufacturing, the business climate cooled significantly in July. The manufacturing companies surveyed were markedly less satisfied with their business situation than in the previous month. And the outlook for the coming six months was worse again as well.

In eastern Germany’s service sector, the Business Climate Index slipped a little in July. Participating service providers’ assessments of the business situation and business expectations declined in equal measure.

In eastern German trade, the barometer of business sentiment fell discernibly in June. The businesses surveyed were even less satisfied with their current business than in the previous month. Their expectations for the coming six months were more pessimistic as well.

In eastern German construction, the business climate was somewhat cooler in July. The construction companies surveyed lowered their assessments of the current situation appreciably, while their business expectations improved slightly.

Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute

Chart: ifo Business Climate in Eastern Germany, ifo Business Survey, July 2023

Chart: Business Situation and Expectations Eastern Germany by Sector, ifo Business Survey, July 2023

ifo Business Climate Eastern Germany

(Index, 2015 = 100, seasonally adjusted)

	07/22	08/22	09/22	10/22	11/22	12/22	01/23	02/23	03/23	04/23	05/23	06/23	07/23
Climate	92.1	91.4	86.0	86.8	89.6	92.0	92.5	94.7	95.5	96.6	96.1	93.4	91.4
Situation	100.3	99.2	94.6	93.5	96.1	97.8	97.3	99.5	99.4	98.5	98.9	97.7	94.9
Expectations	84.6	84.3	78.1	80.7	83.5	86.6	87.9	90.2	91.8	94.7	93.4	89.2	87.9

Source: ifo Business Survey.
© ifo Institute

ifo Business Climate Eastern Germany by Sector

(Balances, seasonally adjusted)

	07/22	08/22	09/22	10/22	11/22	12/22	01/23	02/23	03/23	04/23	05/23	06/23	07/23
Eastern Germany	-1.3	-2.7	-14.5	-12.6	-6.7	-1.5	-0.4	4.4	6.1	8.4	7.3	1.4	-2.8
Manufacturing	-7.9	-12.1	-22.7	-11.7	-11.8	-2.4	-2.4	2.6	1.6	4.4	4.6	-3.6	-8.2
Service sector	10.5	7.6	-4.6	-5.8	3.5	6.3	8.6	12.9	17.9	18.1	17.0	14.0	10.5
Trade	-22.2	-26.4	-38.9	-31.6	-29.6	-28.3	-27.4	-20.9	-21.9	-21.2	-22.0	-23.0	-28.9
Construction	-18.9	-16.6	-22.9	-26.6	-21.8	-23.0	-21.6	-23.7	-14.0	-16.1	-16.3	-18.3	-20.2

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.