Berlin - Stagflation and interest rates fears are expected to have resulted in a raft of key surveys showing a fall in European economic sentiment, lead by a drop in German business confidence with figures also tipped to show another increase in the nation's inflation rate.

A rise in German inflation to a forecast 3.2 per cent in June is likely to increase the chances of the European Central Bank delivering its first rate hike in more than a year at its next meeting set down for July 3.

After unexpectedly edging up in May, Germany's closely watched Ifo business confidence index to be released on Monday is forecast to show the mood in the boardrooms of Europe's biggest economy darkening this month amid growing concerns about the threat posed by rising inflation and slowing economic growth.

The fall in the Ifo index could also set the stage for similar downbeat economic confidence surveys emerging from France, the 15-member eurozone second biggest economy, and Belgium, which is seen by economists as a key barometer of the mood in the currency bloc.

In the meantime, household concerns about increasing economic uncertainty and a pickup in inflation chipping away at purchasing power are likely to lead to German consumer confidence coming under pressure in a survey to be released Tuesday.

The Munich-based Ifo economic institute is forecast say on Monday that its monthly index of 7,000 German executives slipped to 102.3 points this month from 103.5 points in May.

But another rise in German inflation, as shown by data also to be released Thursday could help to result in consumer prices in the eurozone gaining ground again in June.

Annual eurozone inflation climbed to a 16-year high of 3.7 per cent in May and economists are predicting that consumer prices in the currency bloc could accelerate to 4.0 per cent in the coming months.

This would result in consumer prices in the eurozone surging to about double the ECB's annual target of keeping inflation close to but just below 2.0 per cent.

Coming in the wake of figures from around the world showing rising energy costs stoking inflationary pressures, the German statistics office is forecast to say Thursday that annual consumer prices in the country rose from 3.0 per cent in May to 3.2 per cent this month.

Economists are expecting a 0.2-per-cent month-on-month increase in Germany's inflation rate in June.

The US Federal Reserve is expected to add to global inflation fears when its sharpens its tone about the threat posed by resurgent inflationary pressures in comments following its meeting next week.

ECB chief Jean-Claude Trichet has already placed investors on notice that renewed inflationary pressures could result in the bank's 21-head rate-setting council delivering a 25-basis points rise in borrowing costs when it meets in July.

Adding to the grim outlook for inflation, German factory gate prices surged by annual six per cent in May to record their biggest jump in almost two years, the nation's statistics office said Friday.

On a monthly basis, producer prices edged up by 1 per cent.

Helping to drive the increase was a strong increase in the energy and food sectors with the cost of energy racing ahead by 15 per cent over the year. Annual oil product prices soared by 25.9 per cent. (dpa)