German business confidence fell more than expected in November as firms grew less optimistic about current and future activity and contemplated higher interest rates, a survey showed today.
The Ifo research institute said its monthly business climate index, based on a survey of around 7,000 companies, fell to 97.8 in November from an upwardly revised 98.8 in October, a five year high.
The euro dipped against the dollar and interest rate futures rose on the weaker-than-expected reading.
A separate measure of the health of the services sector, based on a survey of 2,000 firms, fell in October to 7.9, its lowest level since June.
Ifo said the data pointed to a continued "moderate economic recovery" in Germany. "Despite this decline, the business climate index is still above the September level," Ifo said.
Ifo economist Klaus Abberger said future European Central Bank (ECB) monetary policy could be decisive for the economy. The ECB has signalled it will soon raise interest rates slightly for the first time in five years, probably on December 1st.
A breakdown of the survey showed Ifo's measure of current business conditions eased to 97.8 from 98.9 in October, while its gauge of expectations eased to 97.7 from a revised 98.6. Ifo said all sectors grew more gloomy, except for construction.
Germany's new government, headed by conservative Angela Merkel, was sworn into office on Tuesday. It plans to raise sales taxes sharply in 2007 and is hoping that this will lead consumers to boost spending next year in anticipation of the move.