FRANKFURT, Germany

A closely watched survey yesterday showed German business confidence dropped for the first time in 10 months in February, with the retail sector especially hurt by harsh winter weather.

The Munich-based Ifo institute’s business confidence survey said its business climate index fell to 95.2 points from 95.8 points in January.

“Responsible for this decline is especially the situation in retailing, which experienced a setback in February,” Hans-Werner Sinn, the Ifo’s president said in the group’s report.

“On the whole, the firms have assessed their current business situation somewhat more unfavourably than in the previous month. They regard their business outlook for the coming half year slightly more favourably than in January. The economic recovery is expected to continue when winter is over,” Sinn said.

The Ifo survey said manufacturers reported a largely unchanged climate in their business. The participants are somewhat more dissatisfied with their business than in the previous month.

In construction, participants said their current business situation is better than in the previous month, but that the severe winter in Germany has constrained progress. The survey said construction industry participants were clearly more optimistic about their business expectations.

Less people went shopping during the month as the country experienced record cold and snowfalls.

Wholesalers are also more dissatisfied with their current business situation, but they are less sceptical regarding the six month outlook compared with January, the Ifo said.

“Today’s slowing Ifo seems to be mainly driven by the strong winter and not by worsening outlook. Business expectations continue to improve,” Carsten Brzeski, an economist at ING said in a note to clients.

The weakening of the euro should actually help German exporters,” Brzeski said.