German Ifo Business Climate Index posts surprise fall in January

German business sentiment fell unexpectedly this month as companies downgraded their outlooks, a private survey revealed on Thursday. The Munich-based Ifo Institute reported its Business Climate Index, which is based on approximately 7,000 monthly survey responses in the construction, manufacturing, retail and wholesale sectors, decreased to 109.8 from 111.0 points seen December, while market analysts anticipated a slight acceleration to 111.3 in the reported period.  Furthermore, there was a slight confidence fall in wholesale, while retailing sentiment dropped to a five month-low.  In the meantime, the Current Assessment Index advanced to 116.9 in January from 116.7 points registered in the prior month, matching analysts' expectations. However, the Business Expectations Index, which tracks sentiment in the next six months, declined to 103.2 during the reported period from 105.5 in December, hitting the lowest level in five months. 

The latest Ifo report suggests that companies are positively confident in near-term growth. In addition, manufacturers intend to increase prices.  According to forecasts, German industries are likely to gain support from the firming global economy and ECB‘s accommodative monetary policy. Exports are set to appreciate 2.8% this year on the stronger Euro.