German business sentiment unexpectedly rose in June to its highest level in more than 15 years to boost growth hopes for the second quarter, a survey showed today.
The Munich-based Ifo institute said its business climate index, based on a monthly survey of around 7,000 firms, rose to 106.8 from an upwardly revised 105.7 in May. The mid-range forecast in a Reuters poll of economists saw a fall to 105.0.
The euro edged higher against the dollar after news of the stronger-than-expected reading, the strongest since February 1991, while 10-year euro zone government bond yields jumped to their highest level since late 2004.
An Ifo index on business conditions surged to 109.4 from 107.3 in May. The institute's business expectations edged up to 104.2 from 104.0 in May.
Ifo economist Klaus Abberger said that Germany remained on a path of solid expansion and the domestic economy was gaining strength. This left room for the European Central Bank to tighten interest rates further, he added.
The strong Ifo reading followed positive news from leading German firms.
Porsche raised its profit target on Monday, and fashion house Gerry Weber reported an 11 per cent rise in first-half revenues. Recent hard data from the economy has also been positive.
Industrial output rose by its biggest margin in two-and-a-half years in April, and Germany's trade surplus also widened more than expected in April.