Key German Business Confidence Index Up

The Munich-based Ifo economic institute said its monthly business climate index, based on a survey of 7,000 German executives, rose to 103.5 points from 102.4 in April. The March figure came in at 104.8.

Analysts had predicted a slight fall.

Sentiment in the manufacturing sector had improved, both with regard to the current position and predictions for the six months ahead, Ifo president Hans-Werner Sinn said.

Exporters remained optimistic, although executives were less positive than previously, he said.

Sentiment in the construction sector was little changed, while executives in the wholesale and retail sectors were somewhat more optimistic than at the April survey, Sinn said.

On Tuesday, a key investor confidence index fell slightly on inflation concerns.

German annual consumer inflation came in at 2.6 percent in April, after surging to a 12-year high of 3.3 percent in March. The official target set for the euro zone is just under 2 percent.

Sharp rise in GDP

Last week, the statistics office said German gross domestic product (GDP) had risen unexpectedly sharply in the first quarter.

German GDP grew 1.5 percent in the first three months of 2008 compared to the last three months of 2007, the highest increase in 12 years and well above expectations.

German shares have also performed strongly in recent weeks, the DAX 30 index of the top 30 companies traded in Frankfurt rising from a low of 6,182 in March to around 7,140 before midday Wednesday.