Despite concerns about an economic malaise in Europe, German businesses report feeling more confident and are eyeing the next six months with hope, a closely watched survey released Friday has found.
The Munich-based Ifo Institute said its business climate index for April rose to 101.6 points from a revised 98.2 points in March.
It was the second such increase in as many months, after the survey had fallen in February amid a particularly harsh winter that left snow and ice blanketing most, if not all, of Europe's biggest economy.
"The current business situation is assessed by the surveyed firms clearly more positively than in the previous month," said Ifo President Hans Werner Sinn.
"The German economy has shifted into a higher gear," he said.
With spring in the offing, he added that German businesses surveyed planned to add more staffing when and where they could and that the companies that took part in the survey were more optimistic than before.
Those expectations rose to 104 points from 102 the month before, while business' expectations for their current situation were up 4.8 points from March to 99.3 in April.
"An improvement in Ifo current conditions was expected but today's 4.8 point rise in this component is the largest on record, which points to an even stronger pace of activity expansion at the start of the second quarter," said Credit Agricole analyst Frederik Ducrozet.
The Ifo survey said manufacturers reported an increase in confidence in their business with the possibility of better opportunities for exports. Germany is the world's second biggest exporter, trailing only China.
Germany, Europe's largest economy, is heavily dependent on exports, which have declined in the downturn.
The survey also found that retailers and wholesalers were seeing improved confidence, too.
"In both distribution sectors the firms have assessed their current business situation more positively than before," Ifo said in its report. "They also view the six-month outlook less critically."
In construction, however, participants said their current business situation was not as good as the month before, snapping a four-month gain in expectations.
Ducrozet said the improved mood in Germany, along with an uptick in the French economy, reflected a "growing divergence across eurozone countries" that could widen in coming months.
"The French economy has been showing some good performance lately too, including a 1.2 percent rebound in March consumer spending, albeit not to the same extent and not for the same reasons as in Germany," he said. "As a result, the pressure might increase even further on Southern European countries, which have lagged the recovery."
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