6/11/2014: Ifo Survey of Business Climate & Expectations: Euro Area

CES Ifo published their Economic Sentiment Indicators for Euro Area for Q4 2014, showing marked slowdown in the economy on the basis of both current conditions and market expectations 6 months forward.

Here are the details.

Economic Climate Indicator overall has fallen from 118.9 in Q3 2014 to 102.3 in Q4 2014.  This is the lowest reading since Q3 2013 when the index stood at exactly the same level of 102.3.

Present Situation sub-index fell from 128.7 in Q3 2014 to 106.3 in Q4 2014, marking the lowest reading since Q4 2013 when it stood at exactly the same level as in Q4 2014.

Six months forward Expectations sub-index fell from 113.1 in Q3 2014 to 100.0 in Q4 2014, the lowest reading since Q3 2013.

The gap between expectations and present conditions worsened to 94.1 (a reading below 100 means that there is expected deterioration in underlying conditions over the next 6 months compared to current conditions).

The index overall has underestimated the downward momentum in previous quarter.

Chart to illustrate:

As shown above, the European Commission survey of Business Sentiment posted a slight improvement at the end of October, reflected in the Q4 figure to-date. However, we do not have actual projections for full Q4 2014 yet.

25/8/2014: Ifo Surveys of Business Climate & Expectations: Germany & Euro Area

Earlier today, Ifo Institute published its survey of business sentiment in Germany. Here is the latest analysis of their data alongside the previously released euro area sentiment.

Euro area economic climate survey returned index reading of 118.9 at the start of Q3 2014, down sharply on Q2 2014 reading of 123.0 and the lowest reading in 3 quarters. Present situation reading remained unchanged at 128.7 which is identical to Q4 2011 reading and the highest reading since Q1 2012. However, expectations 6 months out index slipped to 113.1 from 119.7 3 months ago and is now at its lowest level for 4 quarters running.

With all of this, the expectations gap relative to current conditions reading - the metric that signals the expected contraction if below 100 and expansion if above 100 - has fallen to 87.9 from 93.0, marking the third consecutive quarter of decline and the third consecutive quarter of staying below 100.

That said, the error direction - the difference between previous expectation for current period and current conditions - remains negative at -9.0 points, for the fourth consecutive quarter running.

The above trends were also reflected in the EU Commission business sentiment surveys. Based on July data, Q3 sentiment is on the declining side, with July reading of 105.8 for EU27, down from Q2 2014 end of quarter reading of 106.4. For the euro area the index remains basically unchanged at 102.2 in July compared to 102.1 in June 2014.

Chart to illustrate

For Germany, Ifo Business Climate Survey for August 2014 came in with rather negative results. Index for industry and trade fell in August to 106.3 points from 108.0 in July. German companies are also more sceptical than in the previous month. As Ifo release states: "The German economy continues to lose steam". Current reading is at the lowest level since mid-2013 and the last time index increased was back in April 2014 with a significant rise last clocked in March 2014.

Chart to illustrate