German business confidence rose as expected in June as the prospect of an early election and weaker euro lifted firms' expectations for the future, the Munich-based Ifo institute said today.
Ifo's business climate index, based on a monthly survey of 7,000 firms, rose to 93.3 in June from 92.9 in May, matching the consensus in a Reuters poll of economists last week.
A component measuring current conditions rose for a second month in a row to 93.7 from 93.4. An index measuring business expectations rose for first time in five months to 92.9 from 92.3 in May.
A breakdown provided by Ifo showed confidence improved in all sectors except construction, with the retail business climate indicator reaching its highest level since October 2003.
Ifo economist Gernot Nerb told Bloomberg Television that the prospect of an early election and a weaker euro were both factors behind the rise.
He said the improvement in the retail component was “remarkable” given talk that Germany's value added tax (VAT) rate was likely to be increased following an election.
But in a statement Ifo said it was “too early” to conclude Germany's economy was set to improve in the coming months.
A cut in euro zone interest rates would have a positive effect on the German economy, Ifo economist Klaus Abberger said.