German business confidence dipped in May, but economists said the data also suggested Europe's biggest economy would continue its modest recovery despite an oil price surge and weak domestic demand.
The Munich-based Ifo research institute said today its closely watched business climate index, based on a monthly poll of 7,000 companies, fell in line with economists expectations to 96.1 from 96.3 in April.
But companies' expectations for the next six months rose slightly, confounding predictions of a fall, while the assessment of current conditions dipped, after rising to a three-year high in April, the institute said.
Ifo President Mr Hans-Werner Sinn said the slight fall in the May business climate indicator was due to "gloom" in the struggling former communist eastern states, whereas in western Germany confidence edged up.
"The latest survey results, especially the almost unchanged expectations, point to a continuation of the moderate economic recovery in Germany in coming months," he added.
Earlier today, Federal Statistics Office data confirmed that the economy expanded at the fastest pace in three years in the first quarter, though growth relied almost totally on exports as domestic demand shrank.
The surge in oil prices drove Germany's annual inflation rate up to a 28-month high of 2.1 per cent in May, according to preliminary data released today, up from a 1.6 per cent year-on-year increase in April.