MUNICH: The Ifo Institute, one of Germany's leading economic research centers, says its October index reflecting the country's industry and trade fell to 103.2 from 104.7 in the previous month.

The index is based on monthly responses from 7,000 firms in manufacturing, construction, wholesaling and retailing. The companies were asked to give their assessments of the current business situation and their expectations for the next six months.

Ifo says an assessment of the current business situation is less favorable than last month. And expectations for the next six months continue to "cloud over" as the outlook for the German economy deteriorates.

With a 2005 base line of 100, the manufacturing climate has fallen from 111.2 points in February to 103.2 in October while business expectations have dropped from 108.2 to 98.3 in the same period.

According to Hans-Werner Sinn, president of the Ifo Institute, the collective view of Germany's overall business climate is "markedly less favorable and are now only marginally higher than the long-term average". While business expectations overall continue to fall he notes that exports remain "the only area in which manufacturers express mild confidence".

Despite the drop in manufacturing, the October index saw a rise in wholesaling after three consecutive months of decline; retailers were "markedly less satisfied" with their current business situation and the construction sector remains "at a very good level" as respondents thought their business prospects were improving slightly.

In a separate survey, the Ifo indicator for the German service sector rose in October to 23.8 points from 19.0 in the previous month. The institute says service providers apparently are far more satisfied with their current business situation, more optimistic about future business developments and plan to recruit additional staff. However the survey, based on 2,500 monthly responses, excludes distribution, financial services, leasing, insurance and government.