MNI Data Analysis: Apr Ifo Could Pose Needless Downside Risk

--March German Ifo BCI Rebased 103.2 Vs Prior 114.7 

     LONDON (MNI) - The April print of Germany's Ifo Business Climate Indicator

(BCI), a leading gauge of economic activity in Germany, may pose an unwarranted

downside surprise risk to markets as methodological changes are implemented. 

     Although announced earlier this week, changes made to the BCI, namely the

rebase of the index and the inclusion of service sector responses in its

calculation, may have slipped under the radar and may catch some analysts off

guard.  

     The changes mean the entire index will be revised lower. Comparing the old

time series, which took 2005 as the base year, versus the refreshed time series,

taking 2015 as its base year, on average the new index (when comparing the data

since 2005) lies 8.6 points lower than the older version.

     That means April's result, especially in the context of the recent drop-off

in confidence relayed by the survey and string of slightly disappointing

industrial production and trade results, could spook markets unnecessarily if

perceived purely as a further decline in business sentiment.  The index has

declined consecutively since November.   

     Rebased, the reading for March will change from its previous reading of

114.7 to 103.2 under the new methodology. The changes will first take effect

from the April print of the survey, set for release on April 24 at 1030 CEST. 

     Germany, typically known as the industrial powerhouse of the euro area, has

a services sector with increasing influence -services accounts for around 60% of

German GDP -- and to capture this the BCI will now include responses from

service sector firms. Prior to this, the survey focussed exclusively on

manufacturing, construction, wholesaling and retailing firms only.   

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com