Germany: IFO index heads further north – Natixis

Johannes Gareis, Research Analyst at Natixis, notes that the German Ifo index rose to 110.5 in October from 109.5 in the prior month, above expectations.

Key Quotes

The rise was led once again by a decent increase in the expectations component. Combined with yesterday’s PMI numbers, this means upside risks to our outlook for the German economy.The score was above expectations for a small improvement to 109.6 and is the highest since April 2014, when the index stood at 110.7.

The manufacturing sector was the star performer of the rise in expectations. It is worth noting that expectations in manufacturing rose for the third straight month in October, taking the business climate index in manufacturing to 16.7 and further above its long term average of 5. Elsewhere, expectations rose also strongly in the construction sector, hitting a new record high.

Ifo numbers add to the evidence that the outlook for the German economy is improving. Yesterday, Germany’s composite PMI for October rose to a 3-month high, with manufacturers continuing to report solid export demand. Overall, the surveys mean upside risk to our GDP forecast of 1.8% this year and 1.3% next year.”