German business confidence dropped for the first time in almost a year, the Ifo index showed today, surprising analysts and suggesting that a recovery in Europe's top economy will be slow and bumpy.
The closely-watched survey of around 7,000 firms in the key manufacturing, construction, wholesaling and retail sectors fell to 95.2 in February from 95.8 in January, which was its highest level since July 2008.
The result disappointed analysts, who had anticipated a record 11th rise in a row to 96.4 points.
The index is seen as a reliable guide to future economic performance and the surprise fall knocked the euro on the foreign exchange markets.
'For the first time in ten months, the business climate index has not risen,' Hans-Werner Sinn, the institute's president said. He noted that a sour climate in retailing was responsible for the drop.
'The economic recovery is expected to continue when winter is over,' he added.
Other economists also blamed the unusually harsh winter, which saw snow covering most of Germany in January, forcing consumers inside and slowing construction activity.
The German economy is recovering gingerly after suffering its worst recession since World War II, with output slumping by 5% last year. Despite predictions of a solid return to growth in 2010 - the government projects output of around 1.4% - the economy stagnated in the fourth quarter of 2009, the last figures available.
The German economy is heavily dependent on exports and has suffered more than most as the financial crisis took its toll on global trade.
