The IFO business climate index decreased more than expected in June, down from 110.4 to 109.7, back to December 2013 level. Nonetheless the survey is still consistent with dynamic growth in the second quarter, though decelerating from the first quarter (+0.8% q/q). Indeed, the business climate index averaged 110.4 in Q2, a few notches below Q1 average at 110.9.
Business climate decreased in the manufacturing sector, where the business climate index was down from 19.0 in May to 15.7, the lowest level since December 2013. In particular, the export outlook clouded over considerably. Conversely, the business climate improved in construction after four consecutive declines (from -4.0 to -3.7), in wholesale trade (from 11.4 to 12.5) and retailing (from 4.9 to 8.1), indicating that internal demand is improving.
The current situation index remained unchanged at 114.8 in June. Conversely, the expectation index declined further from 106.2 to 104.8, the lowest level since October 2013. In particular, concerns regarding the potential impacts of the crisis in Ukraine and Iraq dampened the confidence of German firms, according to IFO Institute.
The IFO survey confirms the results of the PMI survey, released yesterday. The PMI composite output index was down from 55.6 in May to 54.2 in June, remaining nonetheless above the 50-threshold for the fourteenth month in a row. On average for Q2, thanks to the improvement in services which offset the decline in manufacturing, it was only a notch below Q1 average (55.3 versus 55.4).
BY Caroline NEWHOUSE
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