German business sentiment rose to a seven-month high in June, boosting hopes that Europe's largest economy is stabilising after suffering its sharpest slump since reunification in 1990.
The Ifo think tank said today its business climate index, based on a monthly poll of some 7,000 firms, climbed to 85.9 from 84.3 in May. It was the third rise in a row and took the index to its highest level since November.
A Reuters poll of 44 economists had pointed to a reading of 85.2, with forecasts ranging from 84.2 to 88.9.
The euro dipped against the dollar as traders cited talk in the market of a better number before the release.
"The survey results confirm that the German economy is gradually stabilising," said Ifo President Hans-Werner Sinn in a statement, though he noted that firms' assessment of current business conditions was still very weak.
An Ifo gauge of corporate business expectations rose to an 11-month high of 89.5 in June from 86 in May. By contrast, firms' assessment of current conditions ticked down to 82.4 from 82.5, the survey's worst reading since reunification.
The German economy shrank a record 3.8 per cent in the first quarter of this year, and the Economy Ministry has said a further contraction is likely in the second quarter.
However, the third consecutive rise in the Ifo index has encouraged observers that a return to growth is now in sight.
Some leading German firms have also struck a more upbeat tone about the future in recent weeks, with a number encouraged by global stimulus packages to combat recession.
Industrial conglomerate Siemens said today it expected to win new orders worth some €15 billion ($21 billion) from such programmes in the next three business years.
A thrice-yearly survey by the German chambers of industry and commerce (DIHK) last week showed its own measure of business expectations improving for the first time in two years.
However, unemployment is rising and surveys suggest funding for many firms is getting increasingly tight. Manufacturers have been hardest hit by the downturn, stung by a collapse in demand in key markets like the United States.
The latest Ifo survey suggested that better times may lie ahead. Though still deep in negative territory, a sub-index for manufacturing rising to a seven-month high, Ifo said.
Lending support to this view, the chief financial officer of carmaker Volkswagen said on Saturday the firm would likely post a "positive result" in the second quarter.
However, analysts said the June survey did not mean the German economy was now out of danger.
Reuters