Germany's investor confidence increased more-than-expected in June after staying broadly unchanged in the previous month, signaling the prospects for a further pick up in the recovery that started at the beginning of the year.
Data from a survey conducted by the Centre for European Economic Research/ZEW showed Tuesday that the Indicator of Economic Sentiment climbed to a three-month high of 38.5 from 36.4 in May. Economists had forecast a more modest rise to 38.1.
"The rise in the headline ZEW index in June reinforced other data in pointing to an acceleration in the German economy", Capital Economics European Economist James Howat said.
Meanwhile, the measure of confidence in the current economic conditions dropped to 8.6 in June from 8.9 a month earlier. The index was forecast to rise to 9.5.
"The financial experts stick to their assessment: the German economy is likely to pick up speed in the second half of 2013," ZEW President Clemens Fuest said. "However, the results of the current survey indicate that the economy will improve rather slowly."
At the same time, the economic sentiment index for the euro area advanced by three points to 30.6 in June, while the corresponding indicator for the current conditions shed 2.7 points to reach -79.5.
In a sign of improving sentiment among entrepreneurs, industrial production in Europe's largest economy increased in April at the fastest pace in a year, driven mainly by strong construction activity. The better-than-expected output, combined with the pick up in exports, has boosted hopes that the recovery is gathering strength.
Vindicating evidence from latest surveys, a survey compiled my Markit Economics showed that Germany's manufacturing sector contracted at a slower pace in May as output and new business recovered after falling in the previous two months. At the same time, activity in the construction sector increased for the first time in 14 months during May.
Government data released this month showed that Germany's export growth accelerated unexpectedly in April, in line with the improvement in industrial activity.
In its latest monthly report, the Bundesbank said that Germany's economic activity is set to pick up strongly in the second quarter, but the growth momentum will likely ease during summer.
Earlier, the bank had lowered Germany's growth outlook for this year to 0.3 percent from 0.4 percent. The economy is currently forecast to grow 1.5 percent in 2014, which is less than an initially predicted 1.9 percent.
The latest projections came after the European Central Bank lowered its forecast for the euro area economy. ECB now sees a 0.6 percent contraction of the economy this year compared with 0.5 percent contraction projected earlier.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.