German IFO indicator extends downtrend

The German IFO business climate indicator extended its downward trend in August. The IFO indicator fell from a downwardly revised 103.2 to 102.3, slightly below the consensus, which was looking for a decline to 102.7. Nevertheless, the pace of decline slowed somewhat from the previous months. The breakdown shows that weakness was led by the expectations sub-index (94.2 from 95.5), while the current situation sub-index fell only marginally (111.2 from 111.5).

The sector breakdown is quite remarkable as sentiment worsened sharply in retail (-4.7 from 5.1) and wholesale (-2.1 from 3.8) trade, while manufacturing sentiment improved slightly (from -2.0 to -1.2) and construction confidence remained broadly unchanged. While consumption held up relatively well over the previous months, the outcome suggests that retailers are now feeling the pain too. An IFO economist added he expected positive growth in Germany overall this year, but dented in summer.