Key Reading On Germany's Economy At 15-Year High; Manufacturers Slightly Less Optimistic

BERLIN (AP) - German business confidence rose unexpectedly to a new 15-year-high in June, a survey showed Tuesday, as managers take an increasingly rosy view of their current situation and look ahead with optimism.

The Ifo institute's index, a key indicator for Europe's biggest economy, rose to 106.8 points in June from 105.7 in May. It was the highest reading for the survey since February 1991, when it stood at 107.1.

The rise defied economists' expectations that the index would dip for a second consecutive month and slip back to a still-healthy 105.1.

''The economic recovery continues to be robust,'' Ifo said. It added that companies polled ''appraised their current business situation clearly more favorably than in the previous month.''

A section of the survey assessing the current situation rose for the seventh month in row, climbing to 109.4 points from 107.3.

The outlook for the next six months was also brighter, if only marginally. That portion of the index rose to 104.2 points from 104.

Signs that long-stingy German consumers are becoming more willing to spend have fueled recent optimism about the country's economy. Ifo said the climate in retailing improved ''clearly'' this month.

So far, Germany's fitful recovery from a lengthy period of stagnation has been driven largely by strong exports. Ifo said manufacturers were slightly less optimistic this month about the export outlook.

''We still think that the German economy will lose some momentum'' in the second half of the year, said Andreas Rees, an economist with HVB Group.

''Albeit a surprise, the latest Ifo figures do not challenge this view, as the forward-looking expectations figure treaded water,'' Rees wrote in a research note. He cautioned that ''one should not translate the record-high Ifo level simply into hard data.''

Although the Ifo index has been riding high over recent months, a separate survey of investor confidence has headed downward for the past five months.

In June, that index - published by the ZEW institute - dropped sharply on high oil prices, a strong euro, the prospect of rising European interest rates and disillusionment over planned tax hikes.

Germany's various confidence surveys soared after Chancellor Angela Merkel's left-right ''grand coalition'' took office in November, pledging to tackle high unemployment and cut Germany's budget deficit.

However, opposition and business leaders increasingly are questioning whether some of its policies _ particularly a plan to increase the value-added tax paid by consumers next year _ could hurt the economy. They have complained about the administration's slowness to tackle reform of the health system and labor market.

Ifo's monthly survey is based on interviews with about 7,000 managers across Germany.

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