The Ifo institute's gauge of German business confidence fell for a third straight month in April to its lowest level since September 2003 in a sign of continued weak growth, the think tank said today.
Munich-based Ifo's closely-watched business climate index, based on a monthly survey of around 7,000 firms, slipped by slightly more than expected to 93.3 from 94.0 in March, as the mood in manufacturing and wholesaling continued to worsen.
"This is an indication that economic growth will continue to be weak in the coming months," Ifo president Hans-Werner Sinn said in a statement. "The business climate worsened further in manufacturing and in wholesaling," he added.
Nevertheless, Mr Sinn said the mood in the retail and construction sectors had improved over the past month.
Lehman Brothers economist Phyllis Papadavid said that high oil prices had probably helped to dampen sentiment in April. "Even though oil may have been a temporary factor in the month there are other factors which make a clip back up in May somewhat uncertain such as the domestic demand situation," she said.
Three straight declines in the headline index, one of Europe's most closely-watched economic indicators, typically signal a downturn in Europe's largest economy, analysts say.
However, Ifo economist Klaus Abberger said Germany was not entering a recession, and that export demand was still firm.
"I don't think this bears the hallmarks of a classic downturn, rather a slowdown in momentum that is likely to continue in the next months," he said.