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German confidence still high as booming exports boost growth

GERMAN business confidence remained at high levels in May as booming exports and rising company spending boosted economic growth in Ireland's third-largest trading partner.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, held at 114.2 from April. Economists had forecast a decline to 113.7.

The new figures come days after a separate report found German investor confidence declined this month and manufacturing growth weakened.

A rebound in construction spending, surging company investment and rising exports powered Germany's fastest growth in almost a year in the first quarter, data showed.

Still, Europe's largest economy may struggle to maintain its momentum as euro-region governments toughen austerity measures to lower budget gaps while surging energy costs squeeze incomes.

"The sentiment is exuberant; we need a growth slowdown to avoid an overheating of the economy," said Andreas Scheuerle, an economist at Dekabank in Frankfurt.

"Business confidence will decline in the coming months, but this is far from being a catastrophe. Growth rates are normalising."

The euro rose after the report. German gross domestic product increased by 1.5pc in the first quarter from the previous three months, the Federal Statistics Office said. That's the fastest growth since the second quarter of 2010.

Exports advanced 2.3pc and construction spending jumped 6.2pc.

"Growth is likely to ease somewhat in the foreseeable future," the Frankfurt-based Bundesbank said in its monthly report last week.

With Greece, Spain and Ireland toughening spending cuts to lower their budget shortfalls, German companies have relied on faster-growing economies to bolster sales.

The global economy may grow 4.4pc this year, with China expanding 9.6pc and India 8.2pc, the IMF has forecast.

Irish Independent