German business sentiment fell more than expected this month as concerns about high oil prices and a planned rise in sales tax next year hit economic expectations.
The Munich-based Ifo institute said its business climate index, based on a monthly survey of around 7,000 firms, fell to 105.6 from 106.8 in June, a slightly bigger fall than analysts had expected.
Chancellor Angela Merkel's coalition government plans to raise VAT by three percentage points to 19% from January 1 to help shore up Germany's public finances.
Ifo economist Gernot Nerb said high oil prices and the situation in the Middle East had an influence.
The Ifo survey followed contrasting reports on Tuesday on business sentiment in other euro zone states, with morale rising in France and the Netherlands in July but falling in Italy.
