German business sentiment improves in August
By Michele Maatouk
Date: Tuesday 25 Aug 2020
(Sharecast News) - German business sentiment improved in August, according to a widely-followed survey released on Tuesday.
The Ifo's headline business climate index rose to 92.6 from a revised 90.4 in July, coming in above consensus expectations for a reading of 92.1.
The current assessment index increased to 87.9 in August from 84.5 the month before, while the expectations index printed at 97.5 compared to 96.7 in July.
Ifo Institute president Clemens Fuest said: "The German economy is on the road to recovery."
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the survey was decent but the rebound in expectations is fading.
"As with the PMIs, however, the key test in the next few months will be whether it stabilises at its current level, having already rebounded significantly. If it does, it will indicate the recovery is ongoing. Meanwhile across sectors, sentiment improved across the board, even in services, in contrast to the slide in the PMI in August.
"Overall, these data only really confirm what we already know, namely that economic activity is now recovering after having collapsed during lockdown. We know from the hard data that the rebound was very strong in the latter part of Q2, but it is now almost surely easing, though survey data remain consistent with decent data through July and August. As for the second wave of the virus, it's difficult to detect in the headline IFO numbers. An outright fall in expectations next month, just as an example, would be a clearer sign that it's shifting sentiment."
Andrew Kenningham, chief Europe economist at Capital Economics, pointed out that despite the improvement, the headline index remains well below its pre-crisis level and is consistent with GDP continuing to contract in year-on-year terms.
"We therefore continue to expect the rebound to run out of steam soon and we remain comfortable with our forecast that GDP will decline by about 5% this calendar year," he said.
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