| Author (Person) | Bower, Helen | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 29.7.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 29/07/2003 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Europe's largest economy is showing signs of recovery according to the Ifo Institute for Economic Research at the University of Munich, which reported a continued increase in its business climate index for Germany for the third month running in July 2003. Ifo's business climate index is a monthly survey of more than 7,000 enterprises in west and east Germany on their appraisals of the business situation ('good'/'satisfactory'/'poor') and their expectations for the next six months ('better'/'same'/ 'worse'). It covers a wide range of German industries including manufacturing, construction, retailing and wholesaling. The enterprises' responses are weighted according to the importance of the industry and are then aggregated. The percentage shares of the positive and negative responses to both the business situation and future expectations are balanced, and a geometric mean is formed, which is divided according to east and west Germany. The series of balances thus derived are linked to a base year (currently 1991) and seasonally adjusted. The Ifo Index is a widely observed early indicator for economic development in Germany. Announcing the index figures for July 2003 - 89.2 points, up from 88.8 points in June - the Institute's President, Hans-Werner Sinn, said that previous experience suggested that 'an improvement in the Ifo Business Climate three months in succession signals a coming economic upturn'. However, the results were less than many analysts had expected and are a reflection of business hopes rather than actual economic output. The index figures contrast with those produced by the Bundesbank earlier in July when it revised downwards an already gloomy industry output and manufacturing data and warned that key industrial sectors such as car manufacturing are in particularly poor shape. But the German government has welcomed the Ifo index, in addition to rising consumer confidence surveys, as a sign that the Germany economy is gradually turning around. It claims that the government's ambitious reform drive, pushed through without much opposition, and accelerated tax cuts have helped to restore confidence in the country's economy and some economists are now suggesting that further reforms from Chancellor Schröder, notably changes to tax and pension rules, could boost output economic output next year. The German economy could also be helped by signs that America's economy is picking up although the strong euro means that domestic demand could get stronger while foreign demand weakens. Overall, most analysts agree that the Ifo's July index is an indication that Germany has turned the corner and that a sustained recovery might be expected to materialise during the final quarter of the year, however modest. These claims follow a short-lived economic upturn in 2002 which failed to sustain itself as corporate spending failed to come through. The promising news about the German economy is likely to be welcomed by EU officials, who have already had to warn the German government about its budget deficit, which failed in 2002 to meet the rules laid out by the Stability and Growth Pact and which the European Commission fears will exceed the 3% benchmark again in 2003.
Helen Bower Compiled: Tuesday, 29 July 2003 The July 2003 Business Climate Index from the Ifo Institute for Economic Research at the University of Munich has suggested that the German economy could be on the road to recovery. |
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| Subject Categories | Economic and Financial Affairs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Countries / Regions | Germany | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
