German companies say inventories too high -Ifo

BERLIN, April 29 (Reuters) - German companies generally regard their inventories as being too high, so industry cannot expect a boost any time soon from firms rebuilding stocks, an economist at the Ifo think tank said on Wednesday.

Klaus Abberger said the Munich-based institute's monthly survey of some 7,000 companies showed that most more focused on reducing stocks before rebuilding them.

"What we see is that companies' inventory levels are still predominantly seen as being too high. That does not suggest we'll see an increase in production due to the inventory cycle," he told Reuters.

Ifo's April business climate index showed German corporate sentiment improved to its best level in five months. However, business conditions remain tough in Europe's largest economy.

The German government slashed its forecast for the economy on Wednesday, saying a collapse in exports would lead to a record 6 percent contraction in gross domestic product (GDP) this year and only meagre growth in 2010.

"In the United States, there are signs that inventories need to be built up again and that there could be positive effects from the inventory cycle, but not here yet," Abberger added.

German carmaker Volkswagen (VOWG.DE) said earlier on Wednesday it slashed production by 24 percent in its first quarter to reduce inventories of unsold vehicles in line with a sharp drop in global car demand.

However, some German companies see signs that their customers have run down inventories and are ready to re-stock.

German drugs-to-chemicals hybrid Merck KGaA (MRCG.DE) said on Monday customers appeared to have depleted feedstock -- inventories of unfinished products -- and looked set to increase orders. (Reporting by Paul Carrel; editing by Patrick Graham)