BERLIN: German business confidence jumped in June, the closely watched Ifo index showed on Monday, hitting its highest level since November.

Ifo's business climate index rose for a third straight month to reach 85.9 points, well ahead of market expectations for 85.3 points and up from a revised 84.3 points in May, it said.

The Ifo institute said that while firms' dissatisfaction with the current business situation was just as strong as it was in May, the survey results "confirm that the German economy is gradually stabilising."

Jennifer McKeown at Capital Economics called the survey "encouraging" but said any pick-up in activity in Europe's biggest economy "might be some time coming."

McKeown said she expects the German economy to contract at least six percent this year and to stagnate in 2010.

Ifo questions around 7,000 firms in manufacturing, construction, wholesaling and retailing for its monthly survey.