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Monday, June 22, 2009

German Business Confidence Up (Slightly)

German business confidence rose for the third month in a row in June. The Ifo institute in Munich reported that its business climate index, based on a survey of 7,000 executives, increased to 85.9 from 84.3 in May. The index reached a 26-year low of 82.2 in March. As far as I can see, this isn't exactly a whole big deal. Just more of the same for now.

In terms of areas of activity, retail sales show no improvement, construction is up slightly, and manufacturing keeps hovering near the bottom.

Ifo’s measure of expectations increased to 89.5 from 86 while a gauge of current conditions eased to 82.4 from 82.5. It is obvious that the current situation in June is no better than March - in fact the conditions are still the worst to date, and all the work is being done by "expectations". It would be really, really interesting to understand just what is driving those expectations.


Anonymous said...

I have two observations on the latest reading of Business ocnfidence in Germany,
1) The stimulus from the U.S., China, and of course Germany is starting to work through the economic pipeline and its being seen by those some 7000 executives who were part of the survey of Business Confidence for May nd part of June.
2) This is an example of the tail wagging the dog where the dog is the real economy and the tail is the stock market. The confidence in the market is trying to tell the real economy that things are indeed getting brighter....even though one must dig through an assortment of weeds to see what it is the market is talking about.

Anonymous said...

Final comment,
Business confidence is possible improving oh so slightly because of the re capitalization of the markets in general(going back to the tail wagging the dog theory)...
What I am looking for is next months readings...
Because it will have included the 12% increase of the euro´s value(the Euro shot up in value the last week in May). German exports are the real economic driver here not the domestic stimulus that Merkel gave the German people.

Anonymous said...

Just for clarification, My two observations are either one, the stimulus is working or two, its just another result of market and government led confidence cheerleading.

Edward Hugh said...


"My two observations are either one, the stimulus is working or two, its just another result of market and government led confidence cheerleading."

And my feeling is that one is not the case - Germany is now (for median age related reasons) driven by exports, so while government demand can make up for a short time for a drop in export growth, domestic demand can never move to the front of the train.

There is no recovery in global trade (irrespective of whether or not we have hit "bottom") so German exports can stay pretty stationary.

The government will increasingly become focused on addressing growing fiscal deficit issues (especially after the elections).

Which means, if you offer me two, and only two, alternatives, I have to go for the second.

But I am still puzzled. How can so many apparently intelligent people be believing such a superficial story.

Don't miss "the Chinese are having to stop builing up their stocks" story which is now going the rounds. The mood can change rapidly, in fact, it may just have done so. As far as I can see on the Reuters Jefferies commodity index, we may have hit a local peak on June 11.

Why don't you come into Facebook? You can see all this and much more in short summary and on a daily basis there.