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August’s Ifo Business Climate Index remained close to July’s record high, inching down from 116 to 115.9. This is its highest level since 1992, when data for reunified Germany became available. However, from data for Western Germany, it becomes apparent that this could be the highest level since the index was first calculated in 1969. Does this mean that German growth is also at a 50-year high?
Other economic indicators such as the PMI indices can be better at predicting economic growth than the Ifo Business Climate Index. The Ifo index is calculated from two data series, namely business expectations and the current business situation. Although the current business situation series has significantly boosted the overall level of the Ifo index, the business expectations series provides a better indication of economic growth. Current index levels are in line with an annualised German growth rate exceeding 4%. Although Germany’s growth is unlikely to reach such lofty heights, it can be expected to remain strong
The opinion expressed above is dated 5th September 2017 and is liable to change.
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