German business survey points to recovery


Business confidence has risen sharply in Germany, according to survey data released today.

The Ifo index of business climate in western Germany - the most closely watched national index in the euro zone - rose by a full point in May to 91.5, underlining a growing sense of economic optimism in the euro zone

It will provide the European Central Bank with some justification should it raise euro zone interest rates at the next meeting of its governing council on June 6th.

The survey result follows last week's news that Germany's economy grew in the first three months of this year. It had contracted for three quarters in a row before the rise - the worst performance of any euro zone member state.

However, the rise was mainly in business expectations - which had slipped in April - rather than in the business conditions part of the index. Expectations are important for recovery, since they suggest that businesses may become sufficiently confident to start investing again, bringing the euro zone's investment slump to an end.