German business confidence jumped more than expected in July, the Ifo economic research institute said Friday, adding to signs that the global recession is loosening its grip on Europe's biggest economy, according to dpa. The Munich-based Ifo economic research institute said its closely watched index rose to 87.3 this month from 85.9 in June to record its fourth consecutive monthly gain. Analysts had predicted a rise to 86.4 points points. "It looks as if the economy is getting back into its stride," Ifo chief Hans-Werner Sinn said releasing the latest survey. Based on a survey of 7,000 German executives, the Ifo index rise was powered ahead by a marked increase in the indicator's component measuring current economic conditions. The component gauging business expectations six months down the track also gained ground. The index had slumped to a 26-year-low in March as concerns in German boardrooms grew about the fallout from the steep global economic downturn. Since then, the Ifo index has gained ground on hopes that a string of big government fiscal stimulus packages around the world and hefty global interest rate cuts would help pave the way for an economic pickup going into 2010. While the expectations component rose more than forecast to 90.4 from 89.5, the gauge measuring current conditions raced ahead to 84.3 from 82.4. "The improvement in current business conditions will likely reflect improvements in order demand and current production as well as a reduction in the inventory overhang," said Elga Bartsch, European economist with the US investment house Morgan Stanley. The latest Ifo report also comes in the wake of increases in a slew of key German data, including retail sales, industrial production, factory orders and exports,. In its latest monthly report released Monday, Germany's influential central bank, the Bundesbank said it expects the nation's economy to have contracted only marginally during the second quarter. "Based on available indicators, the economy likely contracted only slightly during the spring from the previous quarter," the Bundesbank said in its July monthly bulletin. This comes after the German economy shrank by a dramatic 3.8 per cent during the first quarter as the world economic slowdown plunged the nation into its biggest economic slump in more than 60 years. Even so, the German economy is forecast to shrink by 6 per cent or more this year with growth in particular dragged down by exports as a steep fall in global trade undercuts foreign orders for the world's biggest exporting nation. Indeed, another key German sentiment survey released last week showed investor confidence reporting a surprise fall in July, underscoring the still fragile state of the nation's economy. The Mannheim-based Centre for European Economic Research (ZEW) said its monthly forward-looking index measuring the mood among analysts and institutional investors slumped 5.3 points to 39.5 amid concerns that the credit crunch could stifle recovery in the nation's economy.
