18. July 2016

Economic Outlook, July 2016

1. Germany - Leading indicators point upward

Most leading indicators for the German economy have continued their improvement. For example, the Ifo Business Climate Index (Ifo-Geschäftsklimaindex) showed an increase both in terms of the assessment of the current situation and as to business expectations. Likewise, the ZEW Indicator of Economic Sentiment (ZEW-Konjunkturindikator), the Economic Sentiment Indicator and the Purchasing Managers’ Index for the German Industry all rose. At 54.5 points, the latter reached its highest level in the last two years. Only the Sentix Economic Index (sentix-Konjunkturindex) declined slightly due to lower expectations. In contrast, the assessment of the business situation was more positive than in the previous month. The data on the mileage of trucks (according to the toll statistics) do not provide a reliable indication: An extension of the toll road network in July 2015 means the numbers cannot yet be compared to the previous year.

2. Eurozone - Mixed development of leading indicators

The leading indicators have again failed to provide a consistent picture. The ZEW Indicator of Economic Sentiment (ZEW-Konjunkturindikator) and the Purchasing Managers’ Index for the Industry in the Euro area (Einkaufsmanagerindex) both improved. At 52.6 points the latter now stands notably above the so-called growth threshold of 50 points. Conversely, the Economic Sentiment Indicator for the Euro zone fell, while the ESI for the entire EU increased slightly. The Sentix Economic Index (sentix-Konjunkturindex) is pointing downward, following a decline of both the assessment of the current situation and of business expectations, which have now even entered negative territory.

The most recent quarterly Ifo Index for the Eurozone from April showed a fall, both in the assessment of the business activity and the business expectations.

3. World Economy - Global leading indicators improving at a low level

The leading indicators for the world economy have improved slightly in recent weeks. Both the OECD-leading indicator and the German Federal Bank’s leading indicator (Bundesbank Frühindikator) rose, albeit at a low level. The global Purchasing Managers’ Index (Einkaufsmanagerindex) for the industry increased marginally to 50.3 points, now sitting barely above the growth threshold of 50 points. Baltic Dry Index also managed to pick up recently. Only the freight index continued to fall.

The most recent quarterly Ifo Index for the World Economic Climate from April recorded a fall. Although the assessment of the economic situation rose marginally, the business expectations deteriorated compared to January.

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Economic Outlook, July 2016

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Volker Leinweber

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