Germany's business mood lightens

A 'glimmer' of hope, but will there really be an upswing?

Germany's business confidence has risen for the first time in eight months, but the reading was lower than expected by analysts.

The Ifo index edged up to 87.4 in January from a revised 87.3 in December, ending seven months of decline.

The head of the Ifo economic think-tank warned the rise was not large enough to indicate a long-term improvement in Europe's largest economy.

"All in all, it is still too early to say there is an upturn on the basis of these data," Ifo President Hans-Werner Sinn said in a statement.

Strong industrial production in November and other economic surveys had indicated an improvement but the euro's rise - hitting the country's export industry - and the talk of a war on Iraq has clouded the outlook.

A Reuters poll of analysts had predicted a rise to 87.5.

'Glimmer of hope'

Last week, another German institute, ZEW, also reported a rise in confidence.

Economy Minister Wolfgang Clement described the figure as a "glimmer of hope" for an economic upturn later in the year.

On Wednesday, the German government will present its annual economic report in which it is expected to cut this year's growth forecast to one percent from 1.5%.

"The general sentiment is improving, but set against that is the uncertainty over Iraq and the strength of the euro," said Elisabeth Andreae, an economist at Commerzbank .

The euro has shot up 9% against the dollar in the past two months to near four year highs of $1.08.

The Ifo index is based on a monthly survey of around 7,000 German businesses.