Mubasher: German business sentiment deteriorated beyond expectations in May, as confidence among service providers dipped, according to survey data released by the Ifo economic institute on Thursday.

The German business climate index slid to 97.9 points in May, from the revised 99.2 in April, according to the Munich-headquartered institute. This came well below a consensus forecast for 99.1 points.

“The German economy is still lacking in momentum,” Ifo’s president Clemens Fuest said, adding that “this was due to a considerably worse assessment [by managers] of the current business situation.”

Business conditions in the service sector dealt a major blow, with the sub-gauge for current sentiment in services recording its biggest monthly drop since April 2013.

Business climate index for the construction sector improved for the third consecutive month, amid already positive assessments of the business conditions.

It is worth noting that Europe’s leading economy avoided a technical recession, with gross domestic product (GDP) rising by 0.4% in the first quarter of this year, with household spending leading the recovery as it grew at its strongest pace in eight years.

An upturn in construction activity and robust exports pushed the German economy to return to the growth track.

By 9:13 am GMT, the EUR/USD pair declined by 0.13% to $1.1135.