- Capital Economics
German business confidence improved more than expected in May, hitting its highest level in five months, and supporting optimism that Euro zone's biggest economy will extend its surprisingly strong start to the year into the second quarter. The German research institute report showed that Business Climate Index picked up to a seasonally adjusted 107.7 this month from a revised 106.6 in April, exceeding forecasts for 106.8. Thus, combined with the stronger PMI numbers, the Ifo provides an upbeat picture of the economic development of Germany. Meanwhile, a separate report showed that the Current Assessment Index rose to 114.2 in May from 113.2 in previous month, beating expectations for 113.2. In addition, the Business Expectations Index that measures attitudes toward business prospects over the next six months, increased to 106.6 this month from 100.4 a month earlier, surpassing expectations for 100.8.
The German economy expanded by 0.7% in the first three months of 2016, indicating its strongest quarterly growth rate in two years, driven mainly by soaring private consumption and higher construction investment. Though, analysts expected the economy to lose steam over the summer months, the Ifo index for May suggested that any slowdown could be very limited.
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