German business confidence cools in February

Confidence among business leaders in Germany fell in February, a closely-watched survey showed Thursday, as companies fear that the current favourable combination of strong growth, low interest rates and low inflation could be coming to an end.

The Munich-based Ifo institute's monthly barometer slipped 2.2 points to 115.4, a slightly sharper fall than expected by analysts surveyed by Factset.

"Germany's very favourable business climate cooled down considerably this month," Ifo head Clemens Fuest said. Looking to different elements of the indicator, most of the fall came in companies' expectations for the months ahead, while their view of the present situation remained at near-record levels.

"After the euphoria of recent months, companies' assessment of the business outlook for the months ahead were far less optimistic," Fuest said.

Ifo's index fell across all the sectors covered by the survey of around 7,000 firms -- manufacturing, wholesaling, retailing and construction.

Germany's economy expanded at its fastest pace since 2011 last year, hitting 2.2 percent growth.

Observers and government ministries expect this year to match or exceed 2017's performance.

But there has been uncertainty for business as Chancellor Angela Merkel has spent months struggling to form a government following tricky September elections.

Meanwhile, firms fear a unique sweet spot for the global economy of strong growth combined with low interest rates and inflation is coming to a close.

There was turmoil on global financial markets earlier this month, as low unemployment figures in the US prompted anxiety the Federal Reserve could raise interest rates more quickly than expected.

"Managers are worried about the strong euro and the unusually volatile capital markets," said Joerg Zeuner, chief economist at public investment bank KfW.

Nevertheless, "concerns about inflation and interest rates were mainly caused by positive economic news," he added.

"I see no serious negative effects for the real economy" from slightly lower confidence, Zeuner said.