|An index of German business confidence fell for a second month in April in the latest signal that Europe’s biggest economy is struggling to escape the troubles of the rest of the euro zone.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 104.4 from 106.7 in March. Analysts had predicted a slight decrease this month to 106.2 points.
Ifo economist Kai Carstensen said: "Although the majority of companies assessed their current business situation as good, they were far more cautious than last month.
Their expectations regarding future business developments were also lower. The German economy is taking a breather.”
Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.
The sub-index measuring the current business situation slipped to 107.2 points in April, its lowest level in four months. The euro declined against the dollar and the yen after the figures came out.
Data published on Tuesday showed a contraction in Germany’s private sector for the first time since November. The composite Purchasing Managers Index fell to 48.8 from 50.6 in March. A PMI above 50 points indicates growth.
The ECB predicts the euro-area economy will contract 0.5 per cent this year before growing 1 per cent in 2014.
By contrast, the Bundesbank forecasts German growth of 0.4 per cent this year and 1.9 per cent next year. Many German companies are compensating for falling sales in Europe, Germany’s biggest export market, by exporting to Asia and the US.