In November, the German IFO business climate indicator improved unexpectedly. The headline index rose marginally, from 106.4 to 106.6, while the consensus was looking for a further decline. The breakdown shows that the current assessment subindex stayed unchanged at 116.7, while the expectations index rose from 97.0 to 97.3.
Sector details show a more mixed picture as sentiment deteriorated somewhat in the manufacturing (8.6 from 9.6) and retail (1.3 from 1.9) sector, while confidence improved in wholesale trade (9.8 from 6.3) and construction (-9.3 from -13.6). IFO’s Abberger said that Germany has good chances to avoid recession this winter and added that retailers are slightly optimistic for this year’s Christmas shopping season. Compared to other confidence indicators, the German IFO is holding up surprisingly well and we believe that it will be very difficult for Germany and the euro zone to avoid a new, possibly mild, recession.