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The Ifo German Business Climate Index for industry and trade has risen slightly in March. The companies have again assessed their current situation more positively than in the previous month. The outlook for the coming six months has also brightened somewhat. These results indicate that with the beginning of the year the German economy has gained strength.
In manufacturing the business climate indicator has risen somewhat. The firms have assessed their current situation clearly more favourably than in February. Confidence with regard to the six-month business outlook has weakened only marginally. Despite the strong euro the firms are more optimistic regarding exports than they were in February. Their hiring plans indicate that the increase in staff levels will continue in the coming months.
In the construction industry the business climate indicator has risen. The dissatisfaction with the current business situation has weakened somewhat, and also with regard to the six-month outlook more confidence has been expressed than in February. In wholesaling the business climate has also improved. Current business has again been assessed more positively, and the outlook is also somewhat brighter. The climate indicator in retailing has fallen slightly following the strong rise in February. This is mainly the result of a worsening of the current business situation, whereas the six-month outlook has been assessed only slightly less optimistically.
The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses of firms in manufacturing, construction, wholesaling and retailing. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterise their situation as “good”, “satisfactorily” or “poor” and their business expectations for the next six months as “more favourable”, “unchanged” or “more unfavourable”.
The balance value of the current business situation is the difference of the percentages of the responses “good” and “poor”; the balance value of the expectations is the difference of the percentages of the responses “more favourable” and “more unfavourable”. Thebusiness climate is a transformed mean of the balances of the business situation and the expectations.
For calculating the index values the transformed balances are all normalised to the average of the year 2000.
Ifo Business Climate for the Service Sector Remains Unchanged
The Ifo Business Climate indicator for the German service sector remains stable in March. For the sixth time in succession the current business situation has been assessed somewhat less positively than in the previous month, but optimism regarding the six-month outlook has increased again. Personnel plans continue to indicate a strong hiring propensity.
