In June, the German IFO business climate indicator weakened for a second straight month. The headline index dropped from 106.9 to 105.3, marginally below the consensus estimate which was looking for a decline to 105.6.
The breakdown shows that weakness was based in the expectations sub-index (97.3 from 100.8), while the current assessment sub-index picked up slightly, from 113.2 to 113.9. The sector details show a worsening in sentiment in the manufacturing (5 from 10.5) and wholesale (5.0 from 7.9) sector. Sentiment improved in retail trade (0.3 from -3.7) and slightly in the construction sector (- 4.6 from -5.2). The IFO indicator is now again at its weakest level since March 2010, suggesting that also German businesses are feeling the impact from the euro zone crisis. An IFO economist added that they don’t see a fall into recession, but expect a dip in the second and third quarter of the year.