German business morale unexpectedly fell in June due to more pessimistic expectations about the performance of Europe's largest economy, a survey showed on Monday.
The Ifo institute said its business climate index declined to 88.6 in June from 89.3 in May, compared with a reading of 89.7 forecast by analysts in a Reuters poll.
"The German economy is having difficulty overcoming stagnation," said Ifo president Clemens Fuest.
The expectations index dropped to 89.0 in June from a slightly revised 90.3 the month before. Analysts had expected that index to rise to 91.0.
"This figure is as bad as it looks," said LBBW bank economist Jens-Oliver Niklasch. "Expectations are clouding over again - and all this at an already low level. The figure also contrasts with the recent trend of forecast increases."
The manufacturing sector, which accounts for about a fifth of the economy, remains mired in a downturn, with companies surveyed by Ifo expressing scepticism about the months ahead.
They were particularly concerned by the declining order backlog, according to Fuest, though they were somewhat more satisfied with current business.
The Ifo index measuring the current business situation stagnated in June, at 88.3, missing analysts' expectations for a slight rise.
