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Frankfurt - German business sentiment plunged further in August, a key index showed on Tuesday, as weakening economic prospects undercut Europe's biggest economy.
The monthly business climate index calculated by Munich-based economic research institute Ifo fell to 94.8 points from 97.5 points in July.
Economists polled by Dow Jones Newswires had forecast a much more modest drop to 97.1 points.
It was the third straight decline, and marked a three-year low according to Jennifer McKeown at Capital Economics.
An Ifo statement quoted president Hans-Werner Sinn as saying that "the German economy is encountering an increasingly more difficult situation."
A sub-index that measures the current situation fell to 103.2 points from 105.6 in July, while expectations for the coming six months dropped to 87.0 points from 89.9 points, Ifo said.
The business climate was lower in both the manufacturing and business sectors.
In manufacturing, survey participants "are markedly more sceptical with regard to the six-month outlook," Ifo said.
They forecast weaker support from exports and planned to observe "more caution in hiring additional staff."
Germany has benefitted from falling unemployment, but the trend has begun to slow, and consumer confidence has also fallen further, a separate survey by the GfK institute showed earlier on Tuesday.
The only bright spot in Ifo's survey was the business climate in wholesaling, where the current situation was seen again "as slightly positive and the outlook is assessed less critically."
- AFP