German business sentiment rose in June to its highest level since May 2008, a closely watched survey showed today, but a dip in expectations signalled a potential slowdown in the recovery later in the year.
The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, rose to 101.8 from 101.5 in May. A Reuters poll of 43 economists last week had pointed to a dip to 101.2.
"We need to differentiate between the current situation and the expectations," said UniCredit economist Andreas Rees. "At the moment business is going well for German companies, especially in the export market.
"But there are warning signals," Mr Rees said. "A slowdown in the market towards the end of the year is becoming increasingly more likely."
An Ifo index on current conditions rose to 101.1 from 99.4 in May. But an expectations index fell to 102.4 from 103.7.
Germany emerged from its deepest post-war recession in the second quarter of last year but the recovery slowed over the winter when severe weather disrupted business activity.
Recent economic indicators have beaten forecasts and pointed to a renewed pick-up. A survey by the German DIHK chambers of industry and commerce published last week showed German firms are increasingly upbeat about their prospects and a majority see current conditions as positive.
Finance minister Wolfgang Schaeuble said this week that growth this year might get closer to 2 per cent than the government had hoped a few weeks ago. Its official forecast is for growth of 1.4 per cent in 2010.
Some leading German companies are also upbeat.
Volkswagen last week shrugged off previously cautious outlooks for 2010 profit, saying a forecast-beating performance in the first five months meant it would now significantly exceed last year's results.
Reuters