German business confidence strengthened more-than-expected to a 5-month high in May as companies were more satisfied with their current situation and turned noticeably optimistic regarding months ahead despite "Brexit" fears, results of a key survey showed Wednesday.

Consumer morale is set to strengthen in June as the economy is expected to grow over coming months, a separate survey revealed.

The business climate indicator rose to 107.7 in May from a revised 106.7 in April, a monthly survey from the Ifo Institute showed. This was the highest reading since December 2015 and above the expected score of 106.8.

It's too early to celebrate though, as the Ifo increase is merely compensation for the decline during the winter months, Joerg Kraemer at Commerzbank said. Basically, the index is moving sideways, and after the strong growth of the first three months, things will return to normal, the economist added.

May's rise in the German Ifo suggests that the economy has continued to grow at pretty healthy rates, but the fast quarterly pace seen in the first quarter will not be sustained, Jennifer McKeown, an economist at Capital Economics, said.

The economy had expanded 0.7 percent in the first quarter, the strongest in two years.

The Munich-based Ifo Institute said the current conditions index rose to 114.2 in May from 113.2 in the previous month and exceeded the expected score of 113.4.

At the same time, the expectations index climbed to 101.6 from a revised 100.5. Economists had forecast the score to rise to 100.8.

In manufacturing, the business climate improved for the third straight month. Business confidence among wholesalers and retailers recovered from April. At the same time, in construction, business sentiment rose to a new record high since 1991.

However, the business confidence index in services weakened to 24.8 in May from 28.0 in April.

Elsewhere, the forward-looking consumer sentiment index rose to 9.8 in June from 9.7 in May, the market research group GfK said. The score was forecast to remain unchanged in June.

While economic expectations and the propensity to buy both increased in May, income expectations suffered losses.

The economic expectations index gained two points to 8.3 in May. Consumers are assuming that the German economy will continue to achieve positive growth, even though the rates of increase are expected to remain rather moderate.

Meanwhile, the indicator for income expectations dropped 5.7 points to 51.8 points, losing a significant proportion of the gains it enjoyed in April, GfK said.

In contrast to income expectations, the propensity to buy indicator improved again on its already very high level. The index rose 2.3 points to 57.7 points, which represents a 1-year high.

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