Germany's leading business confidence index fell for the third month in succession yesterday, driving down the euro in turn against the dollar.

However the Ifo economic institute in Munich warned against writing off the German economy, saying it was a long way from recession.

"I don't think that it is a downward trend in the classic sense, but rather a weakening in the dynamic that will continue in the coming months," said Klaus Abberger, an Ifo economist.

Nevertheless, three consecutive falls has, in the past, served as an anecdotal early warning of a looming economic slowdown.

The Ifo index is compiled from surveys of 7,000 company managers, asking them to rate the outlook of orders and investment at present and for the next six months.

The April index dropped to 93.3 per cent, its lowest level since September 2003.

The business climate cooled down most in the industrial and wholesale trade sectors, while managers in the retail sector remained optimistic about their prospects.

"We don't see the latest worsening of the Ifo business climate index as a trend," said a spokeswoman for the federal economics ministry in Berlin.

However, the Ifo data comes amid speculation that the federal government in Berlin is planning to reduce its economic growth forecasts in the near future from 1.6 and 1.75 per cent in the current and coming years, to 1 and 1.75 per cent respectively.

The Ifo news saw the euro drop in trading against the dollar to $1.29. The euro is down almost 4 per cent against the dollar so far this year, in part based on concern that the euro-zone economy is faltering.