The Ifo survey of the German business climate fell from a reading of 106.7 last month to 104.4 in April, lower than most analysts had forecast.
The poll of 7,000 executives also showed firms lost some hope about future business in the month, with its outlook sub-index dropping to 101.6 from 103.6 in March.
While opinion is split on whether Germany was in recession in the last quarter, yesterday’s data adds to a growing pall over the economy.
Purchasing managers’ index (PMI) figures on Tuesday pointed to contraction in the private sector. Germany’s official GDP figures will be released on 15 May.
“The sharp dip in Germany’s Ifo index marks another nail in the coffin for stronger recovery this year,” said David Brown at New View Economics.
“Germany will be very lucky to avoid a near term recession in the recent two quarters.”