ifo Business Climate Index Rises Notably (March 2021)
Sentiment among German managers has improved noticeably. The ifo Business Climate Index rose from 92.7 points (seasonally adjusted) in February to 96.6 points in March. This is its highest value since June 2019. Companies were clearly more satisfied with their current business situation. Optimism about the coming months has also returned. Despite the rising rate of infections, the German economy is entering the spring with confidence.
Download
In manufacturing, the business climate continued to recover. Companies were considerably more satisfied with their current business. Their expectations were the most optimistic they have been since November 2010. Demand for manufactured goods rose appreciably. The indications are for recovery across all industries.
In the service sector, the Business Climate Index rose markedly. Satisfaction with the current situation grew. As to expectations, cautious optimism returned for the first time since the fall. Business was particularly good for IT service providers. But hotels, restaurants, and tourism still find themselves in a very bad situation.
In trade, the Business Climate Index surged. The indicators for the current situation and for business expectations both rose sharply. In retail, however, the situation is still bad, albeit slightly less so than the previous month. Positive exceptions were supermarkets, bicycle dealers, and florists.
In construction, the Business Climate Index is back in positive territory. The indicator of the current business situation rose to its highest value in a year. Companies’ expectations also improved.
Clemens Fuest
President of the ifo Institute
The New ifo Business Cycle Clock
The previous ifo Business Cycle Clock did without a mean value adjustment and defined a balance of zero as the normal state. However, this approach leads to an undistorted picture only for business expectations, as their long-term average balance of 4.4 balance points is close to zero. In contrast, for the current business situation, which has a mean value of 20.1 balance points, the previous approach leads to an above-average number of observations of capacity overutilization. This contradicts the assumption that an economy will on average present normal levels of capacity utilization over the long term. Applying a mean adjustment shifts the crosshairs in the new ifo Business Cycle Clock upward and to the right by the respective mean values.
ifo Business Climate Germany
(Index, 2015 = 100, seasonally adjusted)
03/20 | 04/20 | 05/20 | 06/20 | 07/20 | 08/20 | 09/20 | 10/20 | 11/20 | 12/20 | 01/21 | 02/21 | 03/21 | |
Climate | |||||||||||||
Situation | |||||||||||||
Expectations |
Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Germany and by Sector
(Balances, seasonally adjusted)
03/20 | 04/20 | 05/20 | 06/20 | 07/20 | 08/20 | 09/20 | 10/20 | 11/20 | 12/20 | 01/21 | 02/21 | 03/21 | |
Germany | |||||||||||||
Manufacturing | |||||||||||||
Service Sector | |||||||||||||
Trade | |||||||||||||
Construction |
Source: ifo Business Survey.
© ifo Institute