IFO Busines Climate Index

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Definition

The IFO Business Climate Index is a monthly survey that measures the current business conditions of German firms (manufacturing, construction, wholesale and retail industries) and their business expectations six months ahead.

The index is based on a on a 7,000 survey replies. Regarding the current business situation, a company is asked to mark their condition as “good,” “satisfactory,” or “poor.” Also, the firms are asked to grade their business expectations as “more favorable,” “unchanged,” or “more unfavorable.” The headline business climate index is derived from the current and expected business conditions results.

A reading above 100 represents a positive business condition and outlook. On the other hand, a reading below 100 indicates a negative sentiment.

Importance

The index is used as a leading indicator of Germany’s economy. Germany comprises about 25% of the Euro zone’s GDP. Given this, the index can also be employed as a principal barometer of the Euro zone’s economic state.

Link: http://www.cesifo-group.de/portal/page/portal/ifoHome/a-winfo/d1index/10indexgsk

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