German business morale surges to the highest since late 2018 in June

German business sentiment rose above expectations in June and hit the highest level since November 2018, driven by rising optimism about further economic recovery acceleration in the second half of the year.

The Ifo institute index rose to 101.8 in June from 99.2 in May and beat forecast for 100.6 increase, as bounce back from lockdown sparked surge in retail conditions and improved conditions in hospitality sector, which was the worst hit by pandemic, while the manufacturing maintained strong figures.

Chancellor Angela Merkel said Germany is on the brink of strong economic upswing, while the Bundesbank also gave very positive assessment, adding to upbeat economic outlook.

German central bank improved its growth forecasts, expecting the economy to return to pre-pandemic levels by the third quarter, with expectations for 3.7% growth in 2021 and 5.2% in 2022.

Ifo said the economy would grow by 1.3% in the second quarter and by a further 3.6% in Q3, with obstacles on supply bottleneck not to significantly impact Germany’s growth forecasts.