German Ifo – a cold shower

The Ifo Business Climate Index fell significantly in September, from 88.9 to 87.7. This was significantly below consensus expectations (89.4). The Ifo Business Climate fell primarily because companies significantly revised their business expectations for the coming six months downward (from 91.4 to 89.7). The assessment of the current business situation deteriorated comparatively little (from 86.4 to 85.7).

Disappointment with economic policy?

No one knows exactly why companies have become less optimistic about the future in September. Many companies had been counting on a new start in economic policy and an improvement in competitiveness. However, the ongoing dispute within the coalition is making it clear that the governing parties have very different ideas about economic policy. The decline in Ifo business expectations may reflect the disappointment of many companies that the necessary reorientation of economic policy is unlikely to happen.

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