Germany's Ifo business sentiment indicator rose strongly in June on improving domestic demand, the Ifo institute said this morning, fuelling hopes of a second half recovery in Europe's biggest economy.
The Ifo business sentiment index rose to 88.8 in June from 87.6 in May, its second successive rise, exceeding the consensus forecast in a Reuters poll of a rise to 88.0.
West German business conditions rose to 79.4 in June from 78.3 in May, while business expectations in the west also rose, to 98.6 from 97.2 the previous month.
In eastern Germany the business climate index rose to 102.0 from 100.9 in May.
The upbeat figures from Ifo came soon after a survey by Italy's research body ISAE, which showed that Italian business confidence rose in June, as better expectations about short-term production prospects helped pull morale off 16-month lows.
Earlier this month the ZEW institute's expectations indicator for Germany rose by 2.6 points in June to 21.3, outstripping forecasts of a rise to 19.2 from May's 18.7.
ZEW attributed part of the increase to the decision in early June by the European Central Bank to cut rates to two percent.
However, while the June figure showed an improvement, Ifo still remains downbeat on Germany's prospects.
It cut its German gross domestic product (GDP) 2003 growth forecast to zero yesterday and also cut its forecast for 2004 to 1.5 per cent.
Pessimism was borne out by the Belgian central bank's leading indicator for June, which slid to its lowest level since January 1993 on Tuesday. The Belgian index, seen mirroring the wider euro zone, had been expected to be unchanged.