Klaus Abberger, another Ifo economist, said he was certain the German economy should be able to grow at least 1.7 percent in 2006. The government's 2006 growth forecast stands at 1.4 percent. "The data allow the conclusion to be drawn that the recovery is now very broad," Abberger told Reuters. "From a German perspective, scope for further interest rate adjustments is emerging." Driven by sentiment in the retail sector, the Ifo report showed a surge in its index on current business conditions to 105.1 from 101.9 in February. The business expectations index to rose to 105.7 from an upwardly revised 104.9. Alexander Koch, an economist at HVB Group in Munich, said in a research note that Ifo's business expectations appeared inflated, adding: "One should not translate the increase in expectations one-on-one into future hard data." But most economists were more upbeat. "German business confidence is booming," said David Brown, chief European economist at Bear Stearns International. "These numbers will be a fillip for the ECB, who will be looking at the stronger recovery tone in Germany as leverage to justify higher rates ahead," Brown added. The readings for the manufacturing, construction, wholesale and retail sectors all rose. The upbeat report followed recent upbeat earnings outlooks from some leading companies in Germany. German Retailer KarstadtQuelle (KARG.DE: Quote, Profile, Research) posted a 2005 core profit above analysts' expectations on Monday and forecast a rise in sales this year. Other evidence from the euro zone also pointed strongly towards economic pick-up. Italian business confidence jumped in March, reaching its highest level since February 2001, figures showed on Tuesday. French business sentiment dipped slightly in March, data showed on Monday, but bosses there remain upbeat despite mass student protests.