German business confidence poses unexpected rise in June

13:43, June 25, 2011      

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German business confidence posted an unexpected rise in June, according to key economic data released on Friday.

The Munich-based Ifo Institute for Economic Research said the business confidence index in June rose to 114.5 from 114.2 in May, the first improvement since February.

The data was widely expected to slide to the bottom at 113.5, as the uncertainty of the Greek debt crisis worsens and the U.S. economy shows signs of slowdown.

"The firms have given clearly more positive assessments of their current business situation than in May. Although their business expectations are again somewhat less optimistic, the firms remain confident. The German economy is experiencing a robust upswing," said Hans-Werner Sinn, president of the Ifo Institute.

In addition, a rise from 121.5 to 123.2 in the index's component measuring how industry leaders are weighing up their current business situation contributed to the surprise increase in the overall index in June.

However, the figures for the next six months dropped from 107.4 to 106.3, the lowest level since last June.

Different sectors showed varied expectations for the business development, according to the data. Retailers' confidence weakened considerably, dropping 3.6 points, while the construction sector signalled a much brighter future, surging 3.6 points.

On June 10, Bundesbank, Germany's central bank, revised up its forecasts for the German economy in 2011 from previous 2.5 percent to 3.1 percent, saying the recovery of the economy "has evolved into a broad-based upturn. Overall production capacity utilization has returned to normal levels."

Bundesbank also predicted that inflation is likely to rise further, by 2.5 percent in 2011 and 1.8 percent in 2012, mainly due to much higher energy prices and increasing overall capacity utilization.

The Ifo institute publishes its business climate index every month, based on a survey of about 7,000 firms in manufacturing, construction, wholesale and retaile sectors, on the current business situation and their expectations for the next six months.

Source: Xinhua
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