Figures show that German business confidence unexpectedly dipped in January after a new year VAT rise but firms' confidence about the business outlook increased.
The Ifo research institute said its business climate index, based on a monthly poll of around 7,000 firms, fell to 107.9, the first decline since August, from 108.7 in December.
Ifo's current conditions component fell to 112.8 from 115.3 in December. However, its business expectations gauge rose to 103.2 from 102.5.
'With regard to the outlook for the coming six months, the firms are somewhat more confident,' Ifo said in a statement.
Chancellor Angela Merkel's ruling coalition raised VAT this month by three percentage points to 19% to help ease the strain on public finances. Ifo economist Klaus Abberger said the VAT rise would have a dampening effect on consumption for a month or two.
