Business confidence in Germany weakened for the second month in succession in April, but still remained close to record highs, suggesting that recovery continues to be strong. The monthly business climate index published by the Ifo institute in Munich dropped by 0.7 percentage points to 110.4, although the current assessment of business conditions actually rose during the month from 115.8 in March to 116.3 – its second highest reading ever recorded. “The current situation is still exceptionally good, while expectations are normalizing,” said Carsten Brzeski of ING Bank. “Even after today’s drop, the Ifo (index) remains close to record highs, and bodes well for a continuation of strong German growth.” The Ifo figures coincided with the latest economic forecast from the German finance ministry, suggesting that growth of gross domestic product doubled in the first quarter to 0.75 percent, compared with 0.4 percent in the last quarter of 2010. The German government has raised its growth forecast for 2011 to 2.6 percent, after 3.6 percent in 2010, although leading economic institutes put the figure for the current year at 2.8 percent, and some analysts suggest it could still reach 3 percent. The easing in business sentiment was predicted by most analysts, in the light of rising energy prices, and the supply constraints caused by the Japanese earthquake and nuclear power crisis. “In the face of the high oil prices, the Japanese crisis, and other risks, it was to be expected that companies would not have such a rosy outlook,” said Ralph Solveen of Commerzbank. “The peak of the economic cycle will pass us by in the next few months. But it would be premature to conclude that means we’re heading for a downturn now.” The interplay between strong demand for German products, production bottlenecks, and strong performance of the German labor market has produced a “small investment boom”, Mr Brzeski said. “The only serious and substantial threat to the German economy from recent global developments is linked to energy prices,” resulting from the combined effects of unrest in the Middle East and the consequences of the Japanese nuclear accident. “Higher energy prices could throw a monkey wrench into the expected pick-up of price consumption,” he said. In spite of the European Central Bank’s decision to raise interest rates early this month, eurozone monetary policy still remains relatively loose for the German economy. “ECB rates are too low, and I don’t see that the ECB will raise rates in the near future to a level that’s appropriate for the German economy,” said Kai Carstensen of the Ifo institute in a Bloomberg television interview.