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Germany's Ifo index at six-month low as business climate cools

In a sign that Germany's recovery is steady but no longer accelerating, business confidence fell back slightly in June. The widely observed index by the Ifo institute dropped to its lowest level since December 2013.

The Ifo institute's business confidence index had dropped to 109.7 points in June, down from a May reading of 110.4 points, the Munich-based economic research group announced on Tuesday.

The reading in June was the lowest since December 2013, Ifo said, but still well above the long-term average of 100 points.

Nevertheless, the decline highlighted ongoing geopolitical concerns among German business leaders which were dampening business confidence, it added.

"The German economy is responding to possible outcomes of the crises affecting Ukraine and Iraq," Ifo President Hans-Werner Sinn said in a statement.

Ifo's Business Confidence Index is an important economic indicator for the health of Europe's largest economy, and is compiled from responses from about 7,000 business leaders.

The fall in June was slightly more pronounced than the figure predicted by a consensus of bank analysts.

DekaBank analyst Andreas Scheuerle told the Reuters news agency that the second consecutive monthly decline, coupled with lower expectations for future business, were pointing to another drop next month.

KFW analyst Jörg Zeuner thought, however, that German businesses were merely forecasting less dynamic growth in the months ahead.

"The very fast pace of growth in the first quarter cannot be maintained. An economic expansion of 2 percent for the whole year can still be reached," Zeuner told Reuters.

After strong growth of 0.8 percent in the first quarter of 2014, the German economy appears set for a slight cooling off in the second quarter. Suggestions to that effect seem to be substantiated by a second month of falling business activity in the eurozone. Markit research group's purchasing managers' index (PMI) for the currency area, released on Monday, fell further in June, after hitting a 35-month high in April.

uhe/pfd (dpa, Reuters)

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