German business confidence unexpectedly increased in May after economic growth accelerated in the first quarter, suggesting companies are coping with record oil prices and the stronger euro.
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, rose to 103.5 from 102.4 in April.
The euro jumped a cent as the report reduced the likelihood the European Central Bank will follow the US Federal Reserve and Bank of England in cutting interest rates to bolster economic growth.
German central banker Axel Weber last week called for the ECB to look at raising borrowing costs to fight inflation. The euro rose as high as $1.5739 from $1.5630 before the report was published.
German companies have reduced labour costs, helping them remain competitive even after the euro rose to a record $1.60 last month and oil prices surged 94 percent in the past year.
Some companies are benefiting from booming demand for their goods in emerging economies.
Volkswagen AG, Europe's largest carmaker, said yesterday it boosted auto sales in China by 28 per cent in the first four months of the year. In the first quarter, China surpassed Germany as Volkswagen's biggest market.
German gross domestic product, which accounts for about a third of the 15-nation euro-region economy, rose 1.5 per cent in the three months through March from the previous quarter as companies stepped up spending on machinery and construction.
Bloomberg