Forecasting qualities of the Ifo Business Climate Index - a look at recent studies

The Ifo Business Climate is a closely ifo is a much considered indicator for the economic evolution in Germany. It is again and again the subject of scientific analyses in which the different qualities of the business climate are examined. At the centre of interest is often the use of the indicator for forecasting purposes. The German Council of Economic Experts, for example, devoted a section of its annual report for 2006/2007 to the Ifo Business Climate. This study by the Ifo Institute confirms the very good performance of the Ifo Business Climate Index as an early indicator for the business developments in manufacturing. The Munich experts have compared the leading-indicator properties of the Ifo Business Climate with the production index in manufacturing. The Ifo Business Climate has an average lead in the turning points of nearly two months and contains a considerably clear business-cycle signal, which is considerably stronger than the production index. For a business-cycle indicator, these are very positive characteristics. An additional advantage of the Ifo Index, is its timely publication. The Ifo survey results are published about four weeks before the production index. This gives the Ifo Business Climate a publication lead in addition to the calculated lead of two months.