German IFO Suggests Sharp, Not Mild, Economic Slump
October 27, 2008
Few economies have experienced the transformation from days of plenty to days of great difficulty more dramatically than Germany, and that shift is documented in the monthly IFO index for the climate in Germany trade and industry. The index peaked last year in May and fell additionally when the banking crisis surfaced in August 2007. However, the extent of deterioration was comparatively modest as recently as March 2008. The table below documents this progression, including the biggest-ever 5.1-point month-to-month slide of corporate expectations posted in the latest month. From a cyclical high of +27.4 in May 2007 among manufacturers, that component has dropped 46.3 points to -18.9. The comparable drop from their cyclical highs in wholesaling, retailing, and construction amount to 33.3 points, 26.2 points, and 13.6 points to -15.1, -25.0 and -27.6, respectively.
| Apr ’07 | Jul ’07 | Mar ’08 | Jun ’08 | Sep ’08 | Oct ’08 | |
| IFO | 108.6 | 106.4 | 104.6 | 101.1 | 92.9 | 90.2 |
| Conditions | 113.2 | 111.3 | 111.4 | 108.2 | 99.9 | 99.9 |
| Expectations | 104.3 | 101.7 | 98.2 | 94.5 | 86.5 | 81.4 |
The IFO Institutes also reports service-sector climate index, which plunged to -4.3 in October from 8.3 in September and 19.4 in May 2008. Current conditions over the past five months dropped 12 points to +14, while expectations slumped 34 points to -21.0.
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