German business confidence rises in June: Ifo

22nd June 2010, Comments 0 comments

German business confidence rose slightly in June, the closely watched Ifo index showed on Tuesday, as corporate leaders gauged the effect of austerity measures on growth prospects.

The sentiment index in Europe's biggest economy ticked up to 101.8 points from 101.5 points in May, the Munich-based Ifo institute.

Analysts polled by Dow Jones Newswires had expected it to edge slightly lower to 101.0 points.

A separate measure of business expectations in the six months to come showed that executives were slightly more reserved, with the index slipping slightly to 102.4 points, compared with a forecast of 102.8 points.

"Companies see business development in the next half-year slightly less optimistically, for the second month in a row," Ifo president Hans-Werner Sinn said in a statement.

"Nevertheless, companies continue to be confident. The economic recovery is continuing."

He said that exports, the German economy's chief growth motor, are not expected to maintain their recent rate of increase, particularly in the manufacturing sector.

And retail consumers, the chief Achilles' heel of the German economy, remain the most wary about the future.

Meanwhile, German Chancellor Angela Merkel has unveiled an austerity plan which foresees more than 80 billion euros (98 billion dollars) in spending cuts between next year and 2014.

Critics in Germany and abroad have warned the belt-tightening could stifle economic growth.

© 2010 AFP

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