- Ifo expectations have increased and current conditions are unchanged, while consensus analysts’ expectations were for a decrease.
- Looking forward, we expect Ifo expectations to decline moderately and stay at levels in line with contraction in Q4. Our Ifo expectations model also points toward further declines.
- Today’s release put upside risk to our estimate of negative growth of -0.3% q/q in Q4 in Germany. We forecast German growth in 2011 of 2.9% and 0.7% in 2012.
Ifo increased, but decreases expected
Ifo current conditions were unchanged at 116.7 in November, which was substantially
better than consensus expectations. This was in line with yesterday’s better than expected PMI data, Expectations surprisingly increased from 97.0 to 97.3. This means that the aggregate Ifo business climate increased to 106.6 from 106.4. Manufacturing expectations decreased further from 92.8 to 92.2, which is somewhat concerning.
Despite a drop in retail expectations from 112.4 to 110.4 the index remains at a decent level. Construction expectations increased from 99.0 to 103.3 and wholesale expectations increased similarly. Looking forward, we expect Ifo expectations to decline moderately, and stay at levels in line with contraction in Q4. Our Ifo expectations model is also pointing toward further declines.
The German economy is faced with substantial headwinds from ongoing fiscal
consolidation in some of its export markets and the drop in the DAX that is down by
about 20% since the beginning of year. These pulls should weigh considerably on the
German economy as investments, exports and private consumption would be affected
negatively.
Today’s release put upside risk to our estimate of negative growth of -0.3% q/q in Q4 in Germany. We forecast German growth in 2011 of 2.9% and 0.7% in 2012.
Looking forward, we expect the Ifo to decline moderately. Our Ifo expectations model points downward and the OECD leading indicator is much more downbeat and indicates that we could see further declines in Ifo expectations.