German Business Confidence Surprisingly Rises

German business confidence in May surprised for the fourth straight month, printing at 103.5 against expectations of 102.0. The survey of 7,000 executives improved from 102.4 in April, when it unexpectedly declined. The manufacturing and trade sectors saw the biggest jump in confidence increasing from 13.3 to 15.0 and from 4.0 to 6.2 respectively.The German economy has proven to be resilient as companies increased efficiency and reduced labor costs to remain competitive. The first quarter saw an increase of 1.5% in growth as demand from emerging markets remains strong, with increased automobile sales to China. The survey also showed that executives have grown more confident about the future outlook with the expectations component rising to 97.3 from 96.7 in April. The strong fundamental data will justifies the ECB staunch hawkish stance and focus on price stability, with speculation increasing that a future rate hike is now a possibility.

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