German business sentiment fell slightly in May, a closely watched survey showed today, bucking expectations for a rise as a deterioration in companies' expectations suggested they are worried by the euro zone crisis.
The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, fell to 101.5 from 101.6 in April. A Reuters poll of 41 economists last week had pointed to a rise to 102.0.
"It is a correction at a high level, clearly driven by the euro zone's sovereign debt crisis and recent market turmoil," said Carsten Brzeski, economist at ING Financial Markets. "Even grass-roots German businesses seem to be getting worried."
The weaker-than-expected Ifo reading chimed with other economic data released earlier on Friday, which showed that Germany's private sector expansion decelerated in May, and that the economy grew at a sluggish pace in the first quarter.
An Ifo index on current conditions edged up to 99.4 from 99.3 in April, but an expectations index fell to 103.7 from 104.0 last month.
Ifo economist Klaus Abberger played down the risks to Germany from the euro zone debt crisis, saying the economy was stable.
Mr Brzeski agreed. "Fundamentally, the Greek crisis has brought some benefits to the German economy," he said. "The weaker euro should support the export-driven recovery and low interest rates should save the government some money on its interest rate bill."
German engineering conglomerate Siemens said earlier the stronger dollar was good for the group.
Airbus parent EADS has also forecast a long-term benefit from the battering the euro has taken.
Germany exited its deepest post-war recession in the second quarter of last year but the recovery slowed in the winter when severe weather disrupted business activity.
Recent economic indicators have beaten forecasts and pointed to a renewed pick-up. Industrial output and orders surged in March, while exports rose at their fastest rate in nearly 18 years, surpassing even the most optimistic predictions.
Reuters