A key German business confidence index dropped sharply in June, providing clear evidence that high oil prices were contributing to a slowdown of Europe's biggest economy.
The monthly business climate index calculated by Munich-based economic research institute Ifo fell to 101.3 points from 103.5 points in May.
The significant fall indicated that companies surveyed 'have assessed their current business situation clearly less favourably than in the previous month, and they are more sceptical regarding the six-month outlook', a statement said.
Ifo's current situation index slipped to 108.3 points in June from 110.1, while the six-month expectations indicator dropped to 94.7 points from 97.2 a month earlier.
'The sharp hike in oil prices is evidently becoming an increasing burden on the German economy,' Ifo said. A breakdown by sector showed that the business climate in Germany's crucial manufacturing sector 'has worsened significantly.'
Both current and six-month indicators fell, with firms reporting that they 'expect weaker stimulus from export business in the coming months.' But despite the strong euro, they do not fear a slump in exports, Ifo said.
The construction sector reported a somewhat improved climate meanwhile, while the index fell in wholesaling and retailing.
