ifo Business Climate Eastern Germany: A Glimmer of Hope, but No More (May 2020)
In May 2020, the first glimmer of hope appeared for the eastern German economy. The ifo Business Climate Index for the entire regional economy in eastern Germany again headed upward, rising from 78.9 to 81.4 points. While assessments of the current situation by the eastern German survey participants continued to decline significantly compared to the previous month, there was a strong improvement in their business expectations for the next three months. However, these remain in negative territory.
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In eastern German manufacturing, sentiment climbed significantly in May. Although the business situation continued to plummet, survey participants raised their business expectations substantially. However, industrial companies are still far from optimistic.
The situation in eastern Germany’s service sector was similar to that of the manufacturing sector. Sentiment rose, driven by a hugely improved outlook, but estimates of the current situation continued to point downward.
In eastern German trade, the recovery progressed more quickly. Its business climate revived considerably, with the sub-indices for wholesale and retail trade both on their way up.
The business climate in eastern German construction also brightened noticeably. This was mainly due to the major improvement in business expectations; assessments of the situation also improved.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
ifo Business Climate Eastern Germany
(Index, 2015 = 100, seasonally adjusted)
05/19 | 06/19 | 07/19 | 08/19 | 09/19 | 10/19 | 11/19 | 12/19 | 01/20 | 02/20 | 03/20 | 04/20 | 05/20 | |
Climate | |||||||||||||
Situation | |||||||||||||
Expectations |
Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Eastern Germany by Sector
(Balances, seasonally adjusted)
05/19 | 06/19 | 07/19 | 08/19 | 09/19 | 10/19 | 11/19 | 12/19 | 01/20 | 02/20 | 03/20 | 04/20 | 05/20 | |
Eastern Germany | |||||||||||||
Manufacturing | |||||||||||||
Service sector | |||||||||||||
Trade | |||||||||||||
Construction |
Source: ifo Business Survey.
© ifo Institute
The ifo Business Climate Eastern Germany is based on approx. 1,700 monthly survey responses from firms in manufacturing, construction, wholesale, and retail. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterize their situation as “good,” “satisfactory,” or “poor” and their business expectations for the next six months as “more favorable,” “unchanged,” or “more unfavorable.” The balance value of the current business situation is the difference of the percentages of the responses “good” and “poor”; the balance value of the expectations is the difference of the percentages of the responses “more favorable” and “more unfavorable.” The business climate is a transformed mean of the balances of the business situation and the expectations. For the purpose of calculating the index values, the transformed balances are all normalized to the average of the year 2015.