German business confidence dropped unexpectedly in March in contrast with a rally last month as companies were slightly less positive about their future business outlook, a key index of business optimism showed on Friday.
The Munich-based Ifo institute's Business Climate Index, based on about 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing, fell to 106.7 in March from 107.4 last month.
Manufacturers assessed both their current business situation and future business developments less optimistically than last month, Ifo said in a statement. Export expectations sank clearly, but remain positive.
The German economy remains on track in a challenging environment thanks to strong domestic demand," Ifo said in the statement, adding that firms assessed their current business situation almost as positively as last month.
The German central bank said earlier this week that the weak start of the biggest European economy to the year 2013 will not jeopardize its recovery. The Bundesbank has predicted a 0.4-percent growth of the German economy in 2013.
Despite the difficulties in many European partner countries, the German economy was still in good shape. After a contraction of 0.6 percent in the final quarter of 2012, the German economy is perking up again as the central bank said recently it expected the economy to expand in the current quarter.