German corporate sentiment fell by more than expected this month, dragged down by a sharp deterioration in companies' business expectations, a closely watched survey showed yesterday.

The Munich-based Ifo economic research institute said its business climate index, based on a monthly poll of around 7,000 firms, fell to 94.8 from 97.5 last month.

The mid-range forecast of 55 economists in a Reuters poll last week was for a fall to 97.1. Forecasts ranged between 94.1 and 100.0. Only one forecaster in the Reuters poll predicted an Ifo reading below the outcome of 94.8. Ifo said companies saw a weaker export outlook. Retailers had turned more sceptical about the outlook for the next six months, the institute added.

A separate Ifo gauge of current conditions fell to 103.2 this month from a downwardly revised 105.6 the previous month, the institute said. A reading of 104.4 had been forecast.

The survey's expectations component fell to 87.0 from a downwardly revised 89.9 last month and compared with a median forecast of 90.5.