Germany's Ifo Index Of Business Sentiment Shows Growing Optimism Among Companies But Only Moderately

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An employee works on the new Mercedes-Benz S-class car at the plant in Sindelfingen before a news conference about the new production line of the Mercedes-Benz S-class in Sindelfingen near Stuttgart, June 12, 2013.

Germany's economy is maintaining its current strength, rising for the second month in a row, according to Ifo's business sentiment index.

The survey's positive change from 105.7 in May to 105.9 in June is in line with the expectations of experts who said this Ifo reading could lead to annual GDP growth of a solid 2 percent or so.

The Munich-based Ifo think tank surveyed about 7,000 firms and found optimism among German exporters, driven largely by improving auto industry exports. However, the weak euro zone economy and reduced stimulus from the European Central Bank, plus increasing competition from Japan and a slowdown in China's growth all pose significant risks, according to analysts.

"The survey is far from perfect as a guide to GDP growth and June's rise was driven entirely by an increase in expectations -- the current conditions index actually fell back slightly, suggesting that the German economy is not yet recovering strongly," said Jonathan Loynes with Capital Economics.

German manufacturing, which accounts for around a fifth of the economy, bounced back after contracting in the previous month as factories reported optimism regarding their current business situation.

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