An important German index of business optimism fell unexpectedly in March but the institute that conducts the survey said the economy remained on course for growth.

The Ifo index fell to 106.7 points from 107.4 in February. Market analysts had expected a slight increase to 107.6 points.

Germany's economy shrank in the last quarter of last year, but most economists think it may have already started growing again and will avoid a recession like the one that has hit the 17-country eurozone as a whole.

The Ifo institute said Friday that "the German economy remains on track in a challenging environment thanks to strong domestic demand."

The March decline follows four straight increases.

Analyst Carsten Brzeski said the indicator showed a "downward correction" after an overly optimistic reading last month.