German business morale improves more than expected to 2-year high By Reuters

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© Reuters. FILE PHOTO: A worker is seen behind scaffoldings at a construction site near the Fernsehturm television tower in Berlin July 7, 2014. REUTERS/Thomas Peter

By Michael Nienaber

BERLIN (Reuters) – German business morale brightened more than expected to hit a two-year high in May as companies became more upbeat in the light of falling COVID-19 infections and cautious steps towards re-opening Europe’s largest economy, a survey showed on Tuesday.

The Ifo institute said its business climate index rose to 99.2 from a revised 96.6 in April. A Reuters poll of analysts had pointed to a smaller increase to 98.2.

“The German economy is picking up speed,” Ifo President Clemens Fuest said in a statement.

The survey among some 9,000 firms in manufacturing, the service sector, trade and construction showed that businesses were more satisfied with their current situation and that they were also more optimistic regarding the coming six months.

Ifo economist Klaus Wohlrabe told Reuters in an interview that the survey data pointed to a quarterly growth rate of 2.6% from April to June and 2.8% from July to September.

KfW bank economist Fritzi Koehler-Geib said she also expected very strong growth in the second half of the year thanks to catch-up effects in services and an easing of input bottlenecks in manufacturing.

“We have therefore revised our economic forecast for 2021 upwards to 3.5% today, despite the poor start to the year,” Koehler-Geib said.

Detailed gross domestic product data released earlier on Tuesday showed that the German economy shrank more than expected in the first quarter as coronavirus curbs spurred consumers to put more money than ever into savings.

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