Germany's economy has been hit by Britain's vote to leave the EU, according to a key survey of business confidence as experts said firms had 'fallen into a summer slump'.

And there is more bad news on the horizon for Angel Merkel, with analysts forecasting weaker growth for Germany's economy in 2017.

But while the German economy suffers a wobble, there was further evidence today that the British economy is bouncing back from its short post-Brexit slump.

Retailers reported their strongest sales in six months this month - recovering the initial slump seen after the Brexit vote and sending the UK's high street booming.

No wonder the German Chancellor Angela Merkel (pictured) was so desperate to stop the British voting for Brexit - its economy has been directly hit by the historic vote. But back in Britain, retailers reported their strongest sales in six months this month - recovering the initial slump seen after the Brexit vote and sending the UK's high street booming

Business groups said British shoppers were shrugging off fears of leaving the EU and helped by the warm weather, were flocking to the high street.

The Confederation of British Industry said its retail sales volume index rose to +9 - its highest since February and a massive increase from -14 in July.

The worrying news for Germany's economy reveals why so many top German business, financial and political figures - including Chancellor Angela Merkel - campaigned so vigorously for Britain to stay in the EU.

Economists said German businesses had 'suddenly woken up to Brexit reality'.

The influential Ifo economic institute's closely-watched index fell to 106.2 in August from its July level of 108.3, reaching its lowest point since December 2014.

Last week it emerged that the employment rate reached a record 74.5 per cent in the three months leading up to the June 23 vote

It also emerged that the UK's net wealth hit £8.8trillion last year - with the average household worth a whopping £378,000

Analysts surveyed by Factset had been expecting a slight rise to 108.5.

'The German economy has fallen into a summer slump,' Ifo president Clemens Fuest said in a statement, noting that all sectors surveyed except construction had reported a drop in the index.

August's sharp drop contrasts with a smaller decline in July, when German business surprised forecasters by appearing to shrug off anxiety over Britain's late-June vote to quit the EU.

It paints a contrasting picture compared to Britain's economy, with today's retail figures from the CBI delivering further evidence of the economy defying predictions of economic chaos after June's dramatic Brexit vote.

Last week it emerged that the employment rate reached a record 74.5 per cent in the three months leading up to the June 23 vote.

And it also emerged that the UK's net wealth hit £8.8trillion last year - with the average household worth a whopping £378,000.

The latest house prices data showed the industry defying warnings of a housing market crash after Brexit, with shares rising in housebuilding firms.

A key business confidence survey revealed the German economy had 'fallen into a summer slump' since Britain voted to leave the EU (the European Parliament pictured above)

Persimmon rose 4.3 per cent as it reported a jump in reservations by buyers of new homes over the past two months despite some surveys suggesting the so-called Brexit vote could cool the housing market.

Germany's Ifo's headline figure is produced from two figures representing companies' feelings on the current business environment and the outlook for the next six months.

The sub-index measuring current business fell to 112.8, two points below its July level.

Confidence in the future outlook also took a two-point blow, falling to 100.1 from 102.1 in July.

Manufacturers, retailers and wholesalers all reported falling confidence in August.

Chemical and electrical firms were among the gloomiest in industry, Ifo chief Fuest said, while food and beverage firms were the least positive among retailers.

But one bright spot was construction, where firms had a more optimistic view of the coming months even as their view of current business clouded over.

Germany's DAX stock market index of 30 leading firms had fallen 1.36 per cent by 0900 GMT on Thursday as investors absorbed the news, with every single blue-chip firm's shares losing value.

'Today's Ifo suggests that German businesses have suddenly woken up to Brexit reality,' economist Carsten Brzeski at ING Diba bank said, noting that the index often takes time to respond to global events.

While Germany's run of good economic news has so far been sustained by high government spending on refugees and strong appetites for consumption among households, investment remains weak, he went on.

'There is a risk that the Ifo will fall further,' warned Stephen Brown of Capital Economics, noting that the boosts to German firms from low oil prices and a weakening euro are fading.

While confidence is stronger than it was in February, when fears of a slowdown in China sent ripples around the world, it still points to a slowdown in German economic growth in 2017, Brown said.