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Ifo indicator is heading down

German Ifo Business Climate Falls 10 Points in March

Posted Wednesday, March 25, 2020 by
Skerdian Meta • 1 min read

The business climate was weakening last year, due to the trade war and the weakening global economy, bottoming at 94.2 points in August. But, as the rhetoric between US and China softened, the business climate improved, climbing to 96.1 points in February.

Although, with the outbreak of coronavirus in Europe, everyone was expecting the ifo business climate to weaken as well. In the first reading for March, Ifo business climate indicator fell to 87.7 points, while today it was revised even lower. Below is the Ifo report, as well as comments from Ifo economist Wohlrabe:

German Ifo Business Climate

  • March final Ifo business climate index 86.1 vs 87.7 prelim
  • Expectations 79.7 vs 82.0 prelim
  • Current assessment 93.0 vs 93.8 prelim

Comments from Ifo economist, Klaus Wohlrabe

  • There could be a GDP drop of between 5-20% this year
  • The degree depends on length of shutdown
  • We presume that there will be a bad recession for at least two quarters
  • The proportion of pessimistic companies has risen strongly in recent days
  • German manufacturing index hit its lowest level since August 2009
  • Says sentiment has never fallen as strongly as this in the services sector
  • Food shops and chemists are among the few areas where business climate has risen

So, there will surely be a recession for a couple of quarters, as Wohlrabe confirms, but no one knows how deep it will be or how long it will last. The manufacturing index is at the lowest levels since 2009 and the Ifo indicator is heading there too. This month wasn’t that bad, since Germany is the least infected country in the Eurozone, but next month will be nastier.

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