Confidence among German retailers has fallen.

The strength of the euro - making exports expensive - and the surging price of oil added to companies' problems, the Ifo institute said.

The Munich-based body's business climate index fell to 104.2 in September from 105.8 in August.

It saw a worsening climate in retail, manufacturing and construction.

However, managers from the wholesale sector who were questioned were more upbeat than a month earlier.

'High uncertainty'

"The companies are assessing their current situation less positively than in August," said Ifo president Hans-Werner Sinn.

"Initial retarding effects are visible, to which events in the financial markets are likely to have contributed."

Over the past two years, exports have helped Germany to emerge from a long period of economic stagnation.

But in recent months surveys of industry and consumers, such as the Ifo report which quizzes about 7,000 firms, have shown confidence slipping.

"Without a doubt, the mixture of high uncertainty about the fallout of the sub-prime crisis on the real economy and the new record highs in the oil price as well as the euro-dollar exchange rate... dampened the solid business outlook of firms," said Unicredit economist Alexander Koch.

The result "underscores that the peak in the business dynamic has already clearly been passed", he added.