RTTNews - German business sentiment improved for the third consecutive month in June as firms' expectations for the coming six months strengthened, confirming that the economy is gradually stabilizing, a closely watched survey showed Monday.

According to a monthly survey carried out by the Munich-based Ifo Institute for Economic Research, business sentiment in the largest Eurozone economy rose to 85.9 in June from a revised reading of 84.3 in May. Economists had expected the index to rise to 85 in June.

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

Assessment of future situation stood at 89.5 in June. This was larger than May's 86 points and the expected level of 86.9. Meanwhile, respondents' dissatisfaction with the current business situation is just as strong as it was in May. The current assessment index stood at 82.4, slightly down from 82.5 and below the consensus forecast of 83.

Among the various sectors covered by the survey, firms in manufacturing assessed their current situation somewhat less unfavorable than in the prior month. A further worsening of business in the coming six months is no longer expected quite so frequently as in the previous month. The survey participants engaged in manufacturing expect the decline in export business to weaken somewhat, while employment plans are less negative than in the prior month.

Business sentiment in wholesaling and in retailing also improved further in June. Overall confidence in the distribution sectors brightened as firms' were clearly less negative in expectations. But, wholesalers and retailers gave a more unfavorable assessment of their current business situation than in May.

At the same time, confidence in construction remained nearly stable. Respondents viewed the current business situation somewhat worse than in the previous month. But, regarding business outlook, they were less reserved in June.

Business confidence stagnated at minus 5 in the service sector during June as the decline in current assessment was offset by rise in expectations. Service providers remained cautious regarding employment plans after the tendency to cut personnel strengthened somewhat.

Commenting on the latest data, Jörg Krämer, Chief Economist at Commerzbank forecast the business expectations to continue its upward movement for the coming three to four months. The surveyed companies are clearly relieved when it emerged that a recession is coming to an end or the economic depression feared a few months ago is not going to evolve.

For comments and feedback: contact editorial@rttnews.com