German business sentiment eases

German business sentiment eased in March, due partly to concerns about the impact of Japan's earthquake and nuclear crisis, but the fall was less than expected and confidence remains strong, a closely watched survey showed.

The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, fell slightly to 111.1, compared with a forecast in a Reuters poll for a drop to 110.5.

The euro ticked up in response to the survey.

"The decline is due solely to expectations. Almost half of the responses were made after the Fukushima disaster," Ifo president Hans-Werner Sinn said in a statement. "On the whole, the firms in Germany remain very confident."

The euro climbed from session lows against the dollar on the better-than-expected data, hitting around $1.4166 from $1.4144 after the survey was released.

Germany has recovered faster than expected from a recession in 2009 that was its deepest since World War Two, and by the fourth quarter of last year its economy was growing by 4 per cent year-on-year.

Analysts said the results of the Ifo survey showed the upturn of Europe's largest economy was continuing little abated at a time when some countries that share the euro currency are struggling under the burden of a sovereign debt crisis.

They said the easing of the main index also likely reflected a reaction to the prospect of near-term rises in interest rates, signalled by the European Central Bank this month, as well as concerns over the impact of high oil prices.

"The shocks in Japan, North Africa/Mideast and the euro crisis - have been largely psychologically," said Citigroup analyst Juergen Michels. "The real effects on the German economy appear to be limited so far."

Trade figures for January registered a slight hiccup in exports but they also showed appetite for goods from abroad grew more than expected, suggesting strong domestic demand.

Domestic demand also fuelled a stronger-than-expected rise in German industrial orders in January, and output bounced back from a plunge caused by icy winter weather late last year.

Reuters