German business confidence stagnates in May - index

German business confidence stagnated in May, according to the closely watched Ifo index, as company heads tried to measure the potential effects of the eurozone debt crisis on their future.

The index for Europe's biggest economy edged down to 101.5 points from 101.6 in April, an Ifo spokesman said, but otherwise remained at its highest level since May 2008.

Analysts surveyed by Dow Jones Newswires had looked for a rise to 102 points, however, but one said the eurozone debt crisis and financial market turmoil appeared to have begun taking their toll.

A separate measure of business expectations in the six months to come edged down as well- for the first time following 16 consecutive increases. Elsewhere in the 16-nation eurozone meanwhile, growth rates showed a "worrying" slowdown in May, data and research group Markit said.

Ifo president Hans-Werner Sinn was cautious in his interpretation of the German data, saying in a statement that the business climate was nearly unchanged and that "the economic recovery in Germany is robust".

A breakdown of the survey showed that while the business climate had improved further in the key manufacturing sector, it was markedly less favourable in retail, wholesale and construction.

Although a bitterly cold winter held German growth to a modest 0.2 per cent in the first quarter of 2010, the economy is projected to grow by 1.4 per cent this year.

The country is slowly recovering from its worst recession in more than six decades, with the economy shrinking by 4.9 per cent in 2009.

In March, industrial output and orders both shot up and second-quarter exports are expected to benefit from the euro's fall against other major currencies owing to the eurozone debt and deficit crisis.