In June, the German IFO business climate indicator continued to surprise on the upside of expectations, in sharp contrast with the other business confidence indicators. The headline index rose from 114.2 to 114.5, while the consensus was looking a decline to 113.4. The details show that strength was based in the current assessment sub-index, which rose from 121.5 to 123.3, hitting another record high. The expectations sub-index deteriorated slightly, from 107.4 to 106.3 in line with expectations. Sector details show only a slight deterioration in the manufacturing sector (27.7 from 27.8) and a more significant worsening in the retail sector (11.5 from 15.1). Construction (-2.0 from -5.6) and wholesale (21.5 from 17.1) sentiment improved in June. The IFO added that firms have given clearly more positive assessment of their current business situation than in May. After a strong first quarter, second quarter GDP will probably very weak, but the IFO is confident that the upswing in Germany will continue. The weak PMI’s yesterday raised fears that the slowdown in growth was more than just a soft patch, but this outcome is an encouraging sign, which suggests the German economy is only going trough a soft patch after a surprisingly strong first quarter.