According to Hans-Werner Sinn, President at the ifo Institute for Economic Research, the business situation has strongly improved for the second month in succession. Also with regard to the outlook for the coming six months, the surveyed firms are again more upbeat than before. “The German economy has shifted into a higher gear,” says Ifo.

In manufacturing the business climate index has risen once more. Manufacturing firms have again given more favourable assessments of their business situation. With regard to their business expectations for the coming 6 months they are also more hopeful than last month. They see better opportunities for exports, too. Currently, firms are utilising their equipment and machines at a clearly stronger rate than at the beginning of the year. The capacity utilisation rate in industry is now somewhat below the long-term average. Company plans to reduce personnel have become rarer.

The business climate has further brightened in retailing as well as wholesaling. In both distribution sectors firms consider their current situation as more positive than before. The six-month outlook is viewed less critically.

In construction the business climate index has fallen slightly after having risen four times in a row. The current business situation is assessed by building contractors as clearly more favourable than in the previous month. However, they are not quite as optimistic as in March about the development of business in the coming six months.

According to Hans-Werner Sinn, President at the Ifo Institute for Economic Research, the business climate in manufacturing is clearly more friendly than in the previous month. Manufacturing firms have reported a much more favourable business situation. With regard to the six-month outlook their confidence has remained nearly unchanged. They view their export opportunities just as promising as in February. Fewer manufacturing firms plan to reduce employment than one month ago.

The business climate index has risen in construction and in wholesaling. Firms of both sectors have assessed their current situation as more positive than in February, and are also less sceptical about the six-month business outlook.

In retail the business situation has improved considerably. Survey participant have assessed their current situation as well as the business outlook as much more positive than in February.

In manufacturing the business climate index has risen noticeably. For the eighth consecutive time, firms assessed their business situation as less unfavourable. Business expectations have also risen. For their export business they anticipate a clear revival. Although the utilisation of machinery and equipment is still below average, the rate is higher than three months ago. The personnel plans of manufacturing firms are still geared to some staff reductions, according to the announcement on 26 January by Hans-Werner Sinn, President of the ifo Institute for Economic Research.

In retail the situation has been reported as nearly unchanged, with retailers somewhat more reserved regarding the six-month outlook than in December. As a result, the business climate in retail remains largely unchanged.

The business climate in wholesale has further improved. Survey participants are again more satisfied with their business situation. They are also less critical regarding business development for the six months to come.

In construction the business climate index has risen strongly. Although the surveyed contractors have given slightly more unfavourable assessments of their current business situation than in December, they are clearly less sceptical regarding business in the near future. Currently, however, many firms are complaining about weather-related constraints on construction activity.

The business climate in manufacturing improved significantly. Manufacturers’ current business situation is more favourable than in October. They perceive business prospects and export opportunities as more positive for the next six months.  Personnel planning is no longer primarily focussed on staff cuts.

The business climate in wholesale and retail also brightened, with participants of the survey being less sceptical about developments in the coming six months. Retailers view their current business situation somewhat more favourably, whereas wholesalers find that the situation in November has remained largely unchanged.

In construction the business climate index fell. Assessing their current situation as similar to that in October, firms are more reserved about future developments.

The economic climate improved in all major economic regions, according to Hans-Werner Sinn, President at the Ifo Institute for Economic Research in Munich. The improvement was particularly marked in Asia, where the indicator even surpassed its long-term average. Also in Western Europe and North America the climate indicator rose clearly in the fourth quarter of 2009.

The economic expectations are now very optimistic almost everywhere, with the exception of several countries of Central and Eastern Europe. In contrast, the current economic situation is still assessed as decidedly unfavourable in all major regions, although these assessments clearly improved over the previous quarter. The appraisals of the current economic situation are particularly negative in the Euro area, North America, Central and Eastern Europe and Russia.

The inflation expectations for 2009, on a worldwide average, are clearly lower than the inflation estimate for the previous year (2.5% compared to 5.4%). According to the expectations of the WES participants, prices will increase only slightly in the course of the coming six months.

The short-term interest rates will increase again in the coming six months for the first time in more than a year, in the opinion of the WES experts. In accord with the more favourable economic outlook, the WES experts anticipate that also the long-term interest rates are likely to increase in the coming six months in most countries.

An increasing number of WES experts regard the euro as overvalued. The other major world currencies, the US dollar, the Japanese yen and the British pound, are now seen as properly valued, on average.

Results of the Ifo World Economic Survey (WES) of the 4th quarter 2009 in co-operation with the International Chamber of Commerce (ICC), Paris, can be downloaded: PDF-file (3 pages)