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German business sentiment improves in July

Stephen Morton | Bloomberg | Getty Images

German business morale improved in July for the third straight month in a row, figures from the Ifo institute released on Thursday showed.

The Business Climate Index rose to 106.2 in July, above expectations of 106.1. In June, the figure was 105.9.

The euro jumped to 1.3235 against the dollar after the data was released, but then fell back to 1.3187.

The monthly index from the Ifo think tank surveys 7,000 firms to get a consensus of business confidence among manufacturing and services industries.

(Read More: ZEW shows dark clouds from China over German economy)

The figures for business climate and conditions rose from the previous month. Business expectations declined slightly, to 102.4 in July from 102.5 in June.

"In total, the conditions in the German economy remain fair, manufacturing is relatively strong and the retail sector, which has not been so strong, is picking up," Gernot Nerb, researcher at Ifo, told CNBC. "The construction sector is in a strong upswing…the consumer is also spending more…domestic demand is relatively buoyant."

Jennifer McKeown, senior European economist at Capital Economics said that the data pointed to a "modest" uptick for Germany.

"The rise...was broadly in line with the consensus forecast but perhaps came as as light disappointment after yesterday's sharper rise in the PMI," she said in a note.

(Read more: Euro zone seen exiting recession only to enter 'stagnation')

Recent weak data on trade and industrial production "were a warning not to get too carried away about the speed of the recovery," she added.

"In all, while prospects for Germany are clearly better than those elsewhere in the euro-zone, we still see GDP rising modestly at best this year and next."

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