ifo Institut

The Ifo Business Climate Structure, Results and Performance

Dr. Klaus Wohlrabe

ifo Institut

2

Ifo Surveys

• The Ifo Business Climate

• The World Economic Survey

• Investment Survey

• Management Survey

• Innovation Survey

• …

ifo Institut

3

Characteristics of the

Ifo Business Cycle Test

• regular survey

• voluntary participation

• mostly qualitative questions

• Provides up-to-date information about the current

economic situation and the upcomining development

• information exchange between firms and the institute

ifo Institut

4

History ifo business surveys

• Start end of 1949 (December 1949: 88 Firms)

• Goal: closing the gap to the official business statistics

• Mainly qualitative questions, as there was (and is) an

aversion against qualitative questions

• 1949: Industry

• 1950: Retailing, 1951 Wholesaling

• 1956: Construction

• 2004: Services

ifo Institut

5

Monthly Schedule

Start of the Survey (Beginning of the month)

Incoming questionaires (online, Paper, Fax)

Reminder

Consistency Check

Calculation of the ifo Business Climate

ifo Institut

6

ifo Institut

7

Problems

• Panel mortality

- „aversion“

- insolvency

- fusion

- change of the contact person

• Numerous surveys (Students, associations)

• Increasing „panel fatigue “

• Competition with official statistics

• Special surveys

• Surveys vs. science

ifo Institut

8

Acquisition of Firms

• Mailings (adress providers)

• Cooperation with associations

• In principle: Every firm can participate

ifo Institut

9

Questionaire

ifo Institut

10

ifo Institut

11

ifo Institut

12

ifo Institut

13

ifo Institut

14

ifo Institut

15

Weighting

ifo Institut

16

Weights depending on the size

of the individual firm

Industry: Employees

Retailing and Wholesaling: Turnover (Size Range)

Construction: Employees (Size Range)

Conversion of Employess and Turnovers

into weighting points

Aggregation along the product line: Gross Value Added

weights

ifo Institut

17

ifo Business Cycle Test: Example

Firm Answer Weight Answer Distribution

+ = -

A satisfactory 5 5

B good 2 2

C good 4 4

D unsatisfactory 2 2

E Satisfactory 5 5

F good 2 2

Sum of Weights 20 8 10 2

Percentage Shares 100% 40% 50% 10%

Balance Statistic = ( good - unsatisfactory) 40% - 10% = +30%

ifo Institut

18

BCL = (Sit + 200) * (Exp + 200) - 200

Calculation of the Ifo Business Climate

BCL: Business Climate, Balance

Sit: Business Situation, Balance

Exp: Business Expectations, Balance

ifo Institut

19

At the publication date

1. Calculation of the Ifo Business Climate for Industry and

Trade

2. Top Priority: Strict confidentiality

3. Draft of the press release (Head of Ifo Surveys)

4. Discussion of the Press Release (President, Head of

the business cycle research, head of Ifo Surveys, press

officer plus two experts)

5. 10:00: Release of the Index via telephone conference

6. Immediate reaction of the DAX and €/$-Exchange rate

ifo Institut

20

Reaction of the DAX

ifo Institut

21

(Aggregated) Results

ifo Institut

22

ifo Institut

23

ifo Institut

24

ifo Institut

25

Correlation: 0.74

ifo Institut

26

Correlation: 0.84!

ifo Institut

27

Correlation: 0.96! (6 Months ahead)

ifo Institut

THE most important

indicator for the German

Economy:

1. Monthly information

about the German

Economy

2. Moves the market

3. Very good relationship

with official figures

4. Very detailed results