Ifo Business Climate

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The CESifo Group, consisting of the Center for Economic Studies (CES), the ifo Institute and the CESifo GmbH (Munich Society for the Promotion of Economic Research), is a unique research group in Europe in the field of economic research. In the opinion of the Senate of the Leibniz Association, an association of German research institutes of various disciplines based in Berlin, it is one of the leading European economic research institutes. The service spectrum ranges from internationally established service products such as the ifo Business Climate Index to internationally recognized research, the promotion of young scientists and the numerous, widely published contributions to the political debate at national and European level.

The ifo Institute determines the ifo Business Climate Index on a monthly basis. It is based on approximately 7,000 monthly reports from companies in the manufacturing, construction, wholesale and retail sectors. Companies are asked to report their current business situation (ifo current business climate) and their expectations for the next six months (ifo economic outlook). They can label their situation as "good", "satisfactory" or "bad" and their business expectations for the next six months as "more favourable", "stable" or "less favourable". The balance value of the current business situation is the difference between the percentages of the answers "good" and "bad", the balance value of the expectations is the difference between the percentages of the answers "more favourable" and "less favourable". The ifo business climate is then calculated as a transformed mean value from the balances of the business situation and expectations according to the following formula:
ifo Business climate = root{ (situation +200)(expectation+200) } – 200.

For the calculation of the index values of the business climate and its components – situation and expectation – the balances are all increased by 200 and standardized to the average of a base year (currently 2015):
Index value = 100 * (current month balance + 200) / (base year average balance + 200).

For all values, a value above expectations is regarded as favourable for the euro exchange rates, while lower values are regarded as negative.

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