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Ifo Institute
1/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
Ifo Business Survey for December 2014 in Brief 1: Dropping
Oil Prices and a Falling Euro Exchange Rate Are Seasonal
Gifts to the German Economy
Klaus Wohlrabe
The Ifo Business Climate Index for industry and trade in Germany rose to 105.5
points in December from 104.7 points last month. Positive assessments of the current business situation remained unchanged. The outlook for the months ahead continued to brighten. Dropping oil prices and a falling euro exchange rate are seasonal
gifts to the German economy.
1 Detailed results (in German) of the Ifo Business Survey and business surveys in other EU countries
are published in the journal »ifo Konjunkturperspektiven«.
www.ifo.de
Ifo Institute
2/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
Business climate in economic sectors
in December 2014
50
40
Balances, seasonally adjusted
Climate positive
but worsened
Climate positive
and improved
30
Services
20
Wholesaling
10
Manufacturing
0
Retailing
-10
Construction
-20
-30
-40
Climate negative
but improved
Climate negative
and worsened
-50
-20
-16
-12
Source: Ifo Business Survey.
-8
-4
0
4
Change in % points
8
12
16
20
©
As the year draws to a close, German companies are planning to recruit more staff.
The Ifo Employment Barometer rose to 106.7 index points in December from 105.4
points in November. Service providers were once again the main driver behind this
development. In manufacturing the employment barometer rose considerably, with
firms gradually abandoning their cautious approach to recruitment. In distribution
there are growing signs of staff cuts in the future. Thanks to the mild winter weather
to date, contractors, by contrast, are looking to hire staff. After somewhat sluggish
developments last month, service providers also expressed a greater willingness to
recruit additional staff.
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Ifo Institute
3/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
German companies can currently access bank credit without any major difficulties.
Credit constraints for German trade and industry fell to 17.4 percent in December
from 18.3 percent last month. This corresponds to the historical low reached in May
2014. As the year draws to a close, the financial environment for German firms therefore remains very good. In turbulent times German companies are seen as a safe
harbour for investment capital. Credit constraints in manufacturing also dropped to a
new historical low at 15 percent. The number of manufacturers reporting restrictive
access to bank credit fell across all company size classes. Large companies that attract international investors are particularly benefiting from recent developments. In
construction credit constraints rose slightly to 21.5 percent. In distribution, by contrast, credit constraints fell and are now at 18.3 percent.
German manufacturing can look forward to rising exports. The Ifo Export Expectations rose from 6.3 to 7.0 balance points in December, marking its third successive
increase. The falling euro exchange rate is benefitting German exporters and the
forecast economic uptick was once again largely driven by exports. Developments in
the individual manufacturing sectors were very diverse. Companies in the chemical
industry, mechanical engineering and electronics were able to win new contracts
from abroad. After last month’s strong developments, however, export expectations
in metal production and processing suffered a setback, but remain mildly positive. In
vehicle manufacturing, by contrast, producers continue to expect further impulses
from international business.
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Ifo Institute
4/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
Manufacturinga)
Export expectations
30
Balances
20
10
0
-10
-20
seasonally adjusted
seasonally adjusted, smoothed
-30
-40
2009
2010
2011
2012
2013
2014
Balances from the percentages of responses on increasing and decreasing export
a)business
Excluding food products and tobacco processing.
Source: Ifo Business Survey, December 2014.
©
In manufacturing the business climate showed further improvements. Assessments
of the good business situation were only slightly downwardly revised. After three
months of negative results, the six-month business outlook turned positive once
again. Exports remain a driving force. The business climate in the intermediate goods
sector brightened. Although firms were slightly less satisfied than recently due to falling demand and order backlogs, which led to lower production levels, last month’s
scepticism nevertheless gave way to positive sentiment as far as future business developments are concerned. Production plans were expansive. Assessments of both
the current business situation and the business indicator improved for producers of
capital goods, leading to an increase in the business climate indicator. The decline in
production slowed down, despite weaker demand. Firms assessed their production
and export outlook as more favourable. In the consumer goods sector (excluding the
food industry) there was no change to the business climate. Slightly less favourable
reports of the current business situation were offset by less negative assessments of
the business outlook. Firms reacted to the continued weakening of demand by curbing production. Finished product stocks nevertheless increased. Although export expectations remained positive, firms expect production to fall overall in the months
ahead. In the food industry the business climate brightened. In view of rising demand
and production levels, firms assessed their current business situation as significantly
better. Expectations regarding future business developments were only mildly sceptical.
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Ifo Institute
5/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
Manufacturinga)
20
Assessment of order stocks
Balances
10
0
-10
-20
-30
-40
-50
seasonally adjusted
seasonally adjusted, smoothed
-60
-70
2009
2010
2011
2012
2013
2014
Balances of the percentage of responses: "relativly large" and "too small"
a)
Excluding food, beverages and tobacco
Source: Ifo Business Survey, December 2014.
©
In construction the business climate deteriorated marginally, but remains at a very
high level. Contractors downwardly revised their good assessments of both the current business situation and their business expectations somewhat. Around 30% of
the contractors surveyed reported construction constraints. Weather effects continue
to have very little impact, while the lack of orders is a more important factor. Machinery capacity utilization was increased by over one percent to 74.7 percent, bringing it
to just below the level seen at the same period last year. Contractors plan to recruit a
significant number of additional employees. The December special question covered
the topic of company closures for holidays and revealed that 18% of the contractors
surveyed shut down their entire building site activities in the summer months for holidays. A further 10% of construction companies only close down their activities in certain branches. Holiday shutdowns mostly occur in August (65%) and/or in July and
August (15%). They tend to last for two weeks (77%). In 8% of the companies surveyed, employees only have a week of holidays due to a shutdown, while 15% have
3 weeks. In civil engineering the business climate deteriorated slightly. Construction
companies assessed both their current business situation and their business expectations for the months ahead slightly more cautiously. The number of firms reporting
weather influences rose to 11%, reaching its highest level since March 2014. A lack
of orders was also cited as a problem by a fifth of companies. In structural engineering, by contrast, the business climate improved slightly. While the current business
situation deteriorated somewhat, the business outlook brightened a little. The weather had no impact on civil engineering. Capacity utilisation rates rose by one and a
half percent to 75.1 percent and are thus higher than the value for the same period
last year.
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Ifo Institute
6/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
Construction
Capacity utilisation rate
76
74
in percent
seasonally adjusted
seasonally adjusted, smoothed
72
70
68
66
64
2009
2010
2011
Source: Ifo Business Survey, December 2014.
2012
2013
2014
©
In wholesaling the business climate indicator rose for the third time in succession.
This was mainly due to far more optimistic expectations, whereas the current business situation was assessed by wholesalers as less favourable. Despite the inventory overhangs that have accumulated, wholesalers plan to increase their order volumes. On balance, they also plan to downsize their staff base slightly. The business
climate indicator in production-related trade continued to rise. This was due to brighter business perspectives, although firms were somewhat less satisfied with their current business situation than last month. Despite higher inventory overhangs, a growing number of new orders will be placed. The climate indicator in consumer goods
wholesaling turned positive again. There were clear signs of optimism in assessments of the business outlook. Inventories were significantly reduced and ordering
activity is expected to pick up. The business climate in the food and beverages sector
cooled down. In view of somewhat sluggish demand and frequent reports of excessive inventories, companies were far less satisfied with their current business situation than last month. Over the next six months, by contrast, more companies expect
a positive development. Ordering plans remain expansively oriented.
In retailing the business climate clouded over. Retailers are more satisfied with their
current business situation, but considerably more pessimistic about the months
ahead. Turnover fell for the sixth month in succession. Inventories were significantly
reduced, but ordering policy remains restrictively oriented. Christmas trade is very
important to some sectors in terms of their annual balance sheet. Retailers in toys, as
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Ifo Institute
7/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
well as photographic and optical goods, reported a far better business situation and
very good seasonal sales. Other typical gift sectors like entertainment electronics and
jewellery retailing, by contrast, reported a less favourable business situation than in
November. In the consumer durables sector the business climate deteriorated. An
improvement in the current business situation was offset by far more pessimistic assessments of the business outlook than last month. Despite slightly lower inventories,
firms plan to exercise greater caution when placing orders. They also plan to further
downsize their staff bases. The business climate indicator in the consumer goods
sector rose slightly. Assessments of the current business situation were less negative, but assessments of the short-term business outlook were poorer. Both personnel and ordering plans remain restrictive. The business climate in the food and beverages industry cooled down. While companies remained almost as satisfied as last
month with their current business situation, they are pessimistic about their six-month
business outlook. The increase in sales prices weakened and distributors are planning to make staff cuts for the first time since April 2013.
The Ifo Business Climate Indicator for the German service sector rose to 25.6 balance points in December from 19.4 points in the previous month. Very good assessments of the current business situation continued to improve. Business expectations
were far more optimistic than in previous months and rose to their highest level since
July 2011. Service providers, particularly in the hotel and catering industry, are planning further price increases. In the tourism sector the business climate indicator continued to fall in December. Although travel agencies and tour operators expressed
slightly greater confidence about the future, they assessed their current business situation as far less positive than in the previous month. Survey participants significantly scaled back their very high expectations of trends in demand. In catering the business climate recovered slightly. Scepticism with regard to the business outlook increased, but survey participants were far more satisfied with their current business
situation at the same time. Prices look set to rise considerably in the months ahead.
In the accommodation sector (hotels, guest houses, B&Bs) the business climate
brightened. Although pessimism prevailed with regard to the business outlook, the
current business situation was assessed as far more favourable. In catering last
month’s mildly optimistic expectations gave way to pessimism in December. Slightly
improved assessments of the current business situation could not prevent the climate
indicator from falling. Developments in balance values were clearly positive in December in the provision of personnel and recruitment sector. Both the current busi-
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Ifo Institute
8/8
Klaus Wohlrabe: „Ifo Business Survey in December 2014 in Brief: Dropping Oil Prices and a Falling
Euro Exchange Rate Are Seasonal Gifts to the German Economy”, in: ifo Schnelldienst 1/2015 (in
German)
ness situation and the outlook were assessed more favourably. The climate indicator
showed a clear upwards trend. A growing number of survey participants plan to increase prices and reported higher staff requirements. Satisfaction with the current
business situation in the advertising sector remained almost unchanged. The climate
indicator rose due to growing confidence with regard to the business outlook. Many
survey participants expect demand to pick up and plan to recruit more staff in the
months ahead. However, firms clearly downscaled their expectations of price increases in the months ahead.
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