German business confidence improves more than expected - Ifo

German business confidence improved more than expected in May, according to a widely-followed survey.

The Ifo's business climate index rose to 114.6 from 113.0 the month before, marking the highest level since 1991 and beating expectations for a reading of 113.1.

The current assessment index increased to 123.2 from 121.4, surpassing expectations of 121.2. Meanwhile, the expectations index rose to 106.5 from 105.2 in April and came in ahead of estimates for a reading of 105.4.

Clemens Fuest, president of the Ifo Institute, said: "Companies upwardly revised assessments of both their current business situation and their business expectations significantly. This development in the ifo index combined with other key economic indicators, points to economic growth of 0.6% in the second quarter. Economic activity in Germany remains very brisk."

The index for the manufacturing sector rose to 26.0 in May from 21.0 while the construction index came in at 12.8, up from 11.5 in April. The wholesaling index rose to 20.3 from 19.8 but the retailing index fell to 11.3 from 13.4 the month before.

Pantheon Macroeconomics said: "The Ifo adds to the evidence of a German economy on a solid footing. The headline business climate index was lifted by increases in both the expectations and current assessment index, signalling a solid pace of GDP growth. Across sectors the manufacturing gauge rose strongly, in line with the PMI, and construction sentiment also increased. Confidence in the retail sector, however, slipped slightly, but it rose for wholesalers."