RTTNews - German business sentiment improved in May for the second consecutive month after reaching a record low in March, a survey showed Monday.

A monthly survey conducted by the Munich-based Ifo Institute for Economic Research showed that German business confidence improved to 84.2 in May from 83.7 in April. However, the indicator stood below the expected reading of 85.

Assessment of future situation continues to rise, pointing to a gradual stabilization of economic output at a low level, the Ifo said.

The Ifo Business Climate Index is based on 7,000 monthly survey responses of firms engaged in manufacturing, construction, wholesaling and retailing.

Assessment of current situation unexpectedly fell to 82.5 from a revised reading of 83.5 in April. Consensus forecast was for a reading of 84.5. At the same time, the expectations index stood at 85.9 in May, up from 83.9 in April. The expected reading was 85.4.

Participants from manufacturing reported a poorer business situation than in April, but expect a not-so-quite unfavorable course of business in the coming six months. They see export opportunities to be less negatively impacted than in previous surveys and personnel is to be reduced less strongly than previously planned.

Meanwhile, business sentiment amongst wholesalers and retailers improved in May. Retailers were not dissatisfied with their current business situation and anticipate a less unfavorable six-month business outlook.

In construction, business climate worsened once again. Building contractors were less satisfied with their current business situation and gave less favorable assessments of the business outlook than in April.

Business sentiment amongst service providers improved further. The indicator stood at minus 5 in May, up from minus 7 in April. Although participants assessed their current business situation less unfavorably than in the previous month, outlook for the next half year remained less skeptical.

Commenting on the data, Chief Economist at Commerzbank, Jörg Krämer noted that the five month average of business climate pointed upwards for the first time since spring 2008. In the second quarter, the German economy probably contracted a little on the first quarter, the economist said. But in case of considerable increase in order intake in the months ahead, this would suggest an end to the recession in the autumn.

Further, Commerzbank sees an anemic upward movement rather than a strong upswing once the recession ends. Such upward movement would not be able to avoid the growth in unemployment.

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