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German business sentiment strengthened to a six-month high at the end of the year, survey data from the ifo institute showed on Wednesday.
The business climate index rose to 96.3 in December from 95.1 in November. This was the highest score since last June and was above the forecast of 95.5.
The German economy is heading into the New Year with more confidence, Clemens Fuest, ifo institute president, said.
Germany's most prominent leading indicator, the ifo index, just added more evidence to a tentative bottoming out of the German economy, Carsten Brzeski, an ING economist said.
The December ifo gives hope for the coming year, especially as it indicates continued solid domestic demand, Ralph Solveen, a Commerzbank analyst, noted.
However, higher growth rates are not yet on the agenda given that signals of a turnaround for manufacturing are still missing, Solveen added.
Assessment of the current situation as well as expectations strengthened in December, the survey showed. The current situation index rose to 98.8 from 98.0 in November.
Likewise, the expectations indicator advanced to 93.8 from 92.3 a month ago.
Due to companies' considerably less pessimistic expectations, confidence in manufacturing recovered somewhat. Nonetheless, their assessment of the current situation worsened.
In the service sector, business confidence reached its highest in last six months. Service providers were clearly more satisfied with their current situation, but cautious optimism returned concerning their business expectations.
In trade, the business climate fell back and the index declined in construction once again owing to more pessimistic expectations.