A monthly survey of approximately 9,000 German businesses measuring their assessment of current conditions and expectations for the next six months. It is one of the most important leading indicators for the eurozone economy.
What IFO Measures
The IFO Business Climate Index is published by the IFO Institute at the University of Munich. It surveys about 9,000 firms in manufacturing, construction, wholesale, retail, and services about their current business situation and their expectations for the coming six months. The composite index combines both components.
IFO vs. ZEW
While the ZEW Economic Sentiment survey polls financial analysts, the IFO surveys actual business managers running companies across Germany. This distinction makes the IFO generally more reliable as a gauge of real economic conditions on the ground. The IFO also has a longer track record and broader sample size.
IFO is released in the fourth week of each month, making it the definitive German sentiment reading for that period. A divergence between IFO and ZEW can signal that financial markets are out of step with the real economy.
Euro Trading Impact
IFO is one of the more market-moving eurozone releases, capable of producing 20-40 pip swings in EUR/USD. Traders focus on the expectations component as it is forward-looking, while the current conditions reading confirms the present state of the economy.
Related Terms
ZEW Economic Sentiment
A monthly survey of financial market experts and analysts in Germany measuring their expectations for the economic outlook over the next six months. It is a leading indicator for the eurozone's largest economy.
Euro (EUR)
The official currency of 20 European Union member states forming the eurozone. The euro is the world's second most traded currency and the second largest reserve currency after the U.S. dollar.
Deutsche Bundesbank
The central bank of Germany and the largest member of the European System of Central Banks. While the ECB now sets eurozone monetary policy, the Bundesbank remains influential through its president's seat on the ECB Governing Council.
Economic Calendar
A schedule of upcoming economic data releases, central bank meetings, and political events that may affect financial markets. Economic calendars are essential planning tools for forex traders.
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