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Last Updated: Tuesday, 25 April 2006, 11:15 GMT 12:15 UK
Germany's business confidence up
German Audi
German manufacturers confidence has risen
Germany's business confidence has risen sharply despite expectations that it would fall in a widely watched survey.

The study by research institute Ifo shows the rise was the biggest in fifteen years and follows the sharp increase for four consecutive months.

Manufacturing, wholesaling and construction confidence all rose in April compared to the previous month.

The index has reached levels similar to when Germany unified in 1991, said IXIS economist Sylvain Broyer.

'Surprisingly good'

The news could foreshadow stronger economic growth by Europe's largest economy.

the numbers remain surprisingly good and would probably make the market bet on a euro zone interest rate hike in May
Economist Olivier Gasnier, Societe Generale

The monthly survey of 7,000 companies saw a rise of 105.9 points in April up from 105.4 points in March.

The index is calculated by combining both negative and positive feedback.

"This is a very strong report on nearly all fronts, with the industry sector still particularly strong," said Societe Generale economist Olivier Gasnier.

Mr Gasnier added: "The only down point is the weakness of the retail component, suggesting that the German economy is still mainly driven by exports and that domestic activity remains capped by high unemployment." "But the numbers remain surprisingly good and would probably make the market bet on a euro zone interest rate hike in May," he added.

Inflation pressures

Pressures on the European Central Bank for a rate rise also increased when preliminary German consumer inflation figures show a rising trend.

In Germany's industrial heartland of North Rhine-Westphalia, prices were up 0.3% month on month, and up 1.9% year on year.

Data from six German states whose inflation figures are all released simultaneously are used to calculate the initial figure for Germany as a whole.

Record oil prices are seen as the biggest single cause for the rise in consumer inflation.

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