After months of negative surprises, some indicators of the Pulse have migrated to the right hand side of the chart. In particular, the ifo business climate index stabilised in October, whereas the market had expected a further decline. Both ifo and pmi surveys signal a slight improvement in sentiment in manufacturing, although the indices remained deep in contraction territory. This is also confirmed by the continuing weakness of orders in August. Hence, the slight pick-up of industrial activity in that month was probably a statistical blip.
The main risk for the economy is that the negative news feed from the export-oriented manufacturing sector is spreading to the domestic economy. GfK reports that consumers are getting more negative about the economy which is also dampening income expectations and their propensity to buy. As a result, consumer confidence is set to decline in November.
index Germany
