Key Reading On Health Of Germany's Economy Slips In July

Widely watched Ifo index pulls back after recent run-up.

BERLIN (AP) - German business confidence slipped in July after hitting a 15-year high in June, with companies less optimistic about both their current situation and the months ahead, a closely watched survey showed Wednesday.

The Ifo institute's index, a key indicator for Europe's biggest economy, fell to 105.6 points from 106.8, reversing last month's unexpected rise. Economists had expected a smaller dip to 106 points.

''The economic situation is still marked by recovery,'' Ifo board member Gebhard Flaig said of the survey results.

However, he added in a statement, ''the surveyed firms were no longer quite so satisfied with their current business situation (and) their business expectations for the coming six months were clearly less optimistic than in June.''

July's decline in companies' assessment of their current situation was the first in eight months. A section of the survey measuring current sentiment declined to 108.6 points from 109.4.

Their outlook for the next six months darkened after a slight rise in June, with that survey portion sinking to 102.6 points from 104.2.

The six-month period takes managers into next January, when value-added tax paid by consumers will rise to 19 percent from 16 percent as the government moves to trim the budget deficit. In addition, the European Central Bank has signaled that interest rates are likely to rise next month.

The mood worsened among retailers, the survey showed. Consumer spending has been a persistent weak point in Germany's economic recovery, although retailers likely benefited from the German-hosted World Cup.

The fitful recovery has been driven primarily by exports. Ifo said that, while industrial companies' export outlook remains positive, it is ''less so than in the previous months.''

Ifo's monthly survey is based on interviews with about 7,000 managers across Germany.

Over recent months, it has consistently shown a brighter picture than a second closely watched indicator, the ZEW institute's index of investor confidence.

ZEW announced last week that its index plunged in July amid worries over soaring oil prices, a strong euro and the impact of upcoming tax hikes, including the VAT raise.

Its decline has echoed charges from business and opposition leaders that Chancellor Angela Merkel's government is doing too much to raise taxes and too little to tackle key structural reforms.