German Ifo Business Climate Index Holds Firm, Signals Fourth-Quarter GDP Pickup

The most closely watched measure of German business sentiment held steady in November, as companies were less optimistic about the future while feeling better than predicted about the current situation.

The CES Ifo Business Climate index came in at 110.4 points in November, stable from October, after Ifo revised down the original 110.5 reading, which was the highest since April 2014.

Capital Economics ' Jack Allen said the index remains at "a fairly high level, suggesting that the economy might have gathered some pace towards the end of the year."

The German economy expanded by a disappointing 0.2% in the third quarter, updated numbers out Thursday confirmed. But Allen said the Ifo data were consistent with November's composite purchasing managers' index for Germany, which pointed to 0.5% fourth-quarter GDP growth.

The Ifo index of businesses' assessment of the current situation rose to 115.6 from 115.1, the third straight month of expansion. But the expectations index dropped to 105.5 from 105.9, whereas the consensus forecast had been for a reading of 106.

The manufacturing index fell, mirroring November's manufacturing purchasing managers' index from IHS Markit, while the construction, wholesaling and retailing indices rose. The trade and industry index was unchanged.

"The firms were once again more satisfied with their current business situation, but with regard to the coming months they are somewhat less optimistic. The economic upturn in Germany remains intact. The German economy seems to be unfazed by the election of Donald Trump as US President," noted Ifo president Clemens Fuest.

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