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Iraq knocks German morale
BERLIN, Germany (Reuters) -- Western Germany's Ifo business climate index fell to 88.1 in March from 88.9 in February, the Ifo economic institute said on Wednesday, below analysts' expectations as sentiment for the next six months deteriorated. The index is one of the first sentiment indicators released since the start of the Iraq war last Thursday, but the majority of the 7,000 firms who participated were surveyed on March 5-20 -- before the U.S.-led attack began. "Around 80 percent of the replies came before the start of the war and around 20 percent afterwards. We had the feeling that the actual start of the war did not make too much difference,'' Ifo institute economist Jan-Egbert Sturm told Reuters. Sturm said this was an impression formed by the analysts rather than anything based on hard facts. The Munich-based institute said it had accepted responses until March 25, six days into the war. A Reuters poll of 25 economists forecast on average the March index would hover at 88.9, the same level as February after two months of increases that had sparked tentative forecasts of an end to stagnation in Europe's largest economy. "Signs in the last two months of an upturn in the business climate have not been confirmed for the time being,'' Ifo President Hans-Werner Sinn said in a statement. Oil, Iraq hit sentimentEconomists said high oil prices and uncertainty about Iraq are likely to have weighed on business sentiment. Ulla Kochwasser, an economist at Mizuho Corporate Bank, said many firms did not appear to expect a quick economic recovery after the Iraq war. "In the coming months the index could swing either way depending on developments in Iraq. At the moment it doesn't tell us very much,'' Kochwasser said. The business expectations component of the index for western Germany fell to 97.2 from 98.4 while the index of firms' assessment of their current conditions fell only slightly, to 79.2 from 79.6, Ifo said. The euro held steady against the dollar after the Ifo index. The euro was trading at $1.0633, unchanged from before the data and slightly down on the day. Ifo said sentiment in the retail and construction sectors improved while there was a slight deterioration in the manufacturing sector and wholesale trade. The east German business climate index fell to 100.8 from 102.0, Ifo said. Meanwhile Europe's biggest carmaker Volkswagen AG said the war against Iraq had so far had no noticeable effect on the global car industry. "Until now there have been no noticeable movements either upwards or downwards,'' said VW Chief Executive Bernd Pischetsrieder at a suppliers fair.
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