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German Business Confidence Sinks To 3-year Low

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Germany's business confidence unexpectedly weakened in April to its lowest level in three years, suggesting that the biggest euro area economy is not yet out of the woods.

The business climate indicator dropped to 99.2 from an upwardly revised 99.7 in March, survey data from the ifo Institute showed on Wednesday.

Economists had expected the index to climb to 99.9 from March's original 99.6.

The latest reading was the lowest since April 2016, when the score was 99.

The business situation index fell to 103.3 from an upwardly revised 103.9 in March. Economists had predicted a score of 103.6. The reading was the lowest since March 2017.

The expectations measure of the survey decreased to 95.2 from 95.6, while it was expected to climb to 96.

"Companies are less satisfied with their current business situation. March's gentle optimism regarding the coming months has evaporated," ifo Institute President Clemens Fuest said.

"The German economy continues to lose steam."

The survey showed that business climate weakened sharply in manufacturing with companies rating the current situation less favorably and turning more pessimistic regarding the coming months.

Morale rose slightly in the services and construction sectors and weakened slightly in the trade industry.

That said, doubts are growing that the construction boom will continue, the ifo said.

"Diverging signals from the main leading indicators in Germany underline the ongoing dichotomy between services and manufacturing but in our view are also a sign of stabilization," ING economist Carsten Brzeski said.

In April, Germany's leading economics research institutes slashed their forecast for economic growth this year, but re-affirmed that the likelihood of a recession is very small.

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