German business climate index is unimpressed by US election and still at a high level

After rising significantly during the past few months the ifo Institute’s business climate index has stagnated in November at a comparatively high level. The business climate is thus back at 110.4 points again, higher than it has been since April 2014. So Donald Trump’s election as the next president of the United States has not had any major repercussions on sentiment at German companies. While the firms still view their current business situation in a positive light, their business expectations for the next six months deteriorated slightly.

In manufacturing industry the assessment of the business situation became slightly dimmer. Compared to the good result in October, the expectations for the next six months even deteriorated somewhat more significantly. But despite the recent decline, the level of the business climate index remains relatively high. Apart from the previous month’s result (16.4 points), at 14.7 points the current response balance is the best since June 2014.

The sentiment barometer was surprisingly good for the wholesale and retail sectors. The wholesalers assessed their current situation as somewhat better and their expectations as far better than in the previous month. In the retail trade a better assessment of the current situation sufficed for an increase in the business climate.

As in the past few months the construction sector chalked up a new all-time high this November with a balance value of 11.4 points (October: 10.3 points) and the business expectations also reported a new record. The construction companies also assessed their current situation as better than in October, but this was not quite enough for a new all-time high.

The service companies were admittedly somewhat less optimistic as far as their expectations for the next few months are concerned, but they are very satisfied with their current situation. Accordingly, the composite index for the service providers reported its best result this year with a response balance of 34.8 points. In addition, the service companies plan further increases in the number of employees.

The current result of the ifo business climate index thus reflects the solid domestic economy in Germany. While foreign trade is generating scant growth stimuli at the moment, construction investments and domestic consumption are creating good sentiment in sectors and companies geared to the domestic economy.

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