German business sentiment fell slightly more than expected in February as a VAT rise weighed, a survey showed today.
The Munich-based Ifo research institute said its business climate index, based on a monthly poll of 7,000 firms, fell to 107.0 from 107.9 in January.
The reading fell below the mid-range forecast in a Reuters poll of 54 economists for a dip to 107.5. Forecasts ranged between 106.5 and 109.2.
Ifo economist Klaus Abberger said the three percentage point rise in value-added tax (VAT) that went into effect last month was proving a significant burden.
But other economists were more optimistic, saying the economic drag from the VAT rise would fade soon.
March Bund futures erased the day's earlier losses and turned positive after the publication of the Ifo index. The euro edged down in the minutes following the data release, to trade at $1.3107 from around $1.3124.
Ifo's business expectations index fell to 102.6 from 103.2 in January. An index on current conditions dipped to 111.6 from 112.8.