A monthly economic report that is issued in Germany toward the end of the month. The IFO surveys over 7,000 companies in Germany to obtain their opinion of the current business situation and asks them to quantify their response by selecting good, satisfactory, or poor and provide their expectations for the future business climate using the same criteria. The index measures the changes in business confidence and is an early indicator for economic development in Germany. It shows whether business spending and capital investment is likely to increase or decrease. The indicator is a leading indicator of future business activity, however it asks respondents about expected business activities, which may not actually occur.
The index is weighted according to the influence of the company’s industry or the sector. The index values start from a base of 100. East Germany and West Germany have separate indexes, though the West German index is used to represent the business outlook for Germany as a whole.