German business sentiment hits best level since April 2018 - Ifo

German business sentiment improved more than expected in June as Covid restrictions were eased, reaching its best level since April 2018, according to a survey released on Thursday by the Ifo Institute.

The Ifo's business climate index rose to 101.8 from 99.2 in June, expectations for a reading of 100.7.

The current situation index increased to 99.6 in June from 95.7 the month before, while the expectations gauge printed at 104.0 compared to 102.9 in May.

Ifo President Clemens Fuest said: "Companies assessed their current business situation as much better. Optimism regarding the second half of the year also grew. The German economy is shaking off the coronavirus crisis."

The manufacturing index rose to 28.5 in June from 25.7 in May, while the gauge for the services sector came in at 22.4, up from 13.7. The trade index jumped to 17.8 from 8.5 and the construction index increased to 4.2 from 3.0.

Oxford Economics said: "Looking ahead, downside risks to the 2021 outlook are easing. The challenges the eurozone’s recovery faces are likely to be only temporary. The manufacturing sector is affected by shortages of input factors and continued supply-chain disruptions.

"For the services sector it will be pivotal to maintain the high vaccination speed to limit the spread of the already prevalent delta variant, especially since we expect consumption to shift towards services. While we think that these factors won’t derail the rebound, they could delay some of the recovery."