The Ifo Institute's survey showed that sentiment among the German companies unexpectedly deteriorated in January, recording a second monthly drop in a row. Overall, this data tally with a weak purchasing managers' index for the month set out earlier this week.
According to the report, the Ifo business climate index fell to 85.2 from 86.3 in December (revised from 86.4). Economists had expected the index to rise to 86.7 points.
The details of the report showed that the current situation sub-index dropped to 87.0 from 88.5 in December. Economists had expected a rise to 88.6. Meanwhile, the expectations index, which measures the six-month outlook from the business perspective, fell to 83.5 from 84.2 in the previous month (revised from 84.3). Consensus estimates suggested an increase to 84.8 points.
"The German economy is stuck in recession," said Clemens Fuest, president of the Ifo Institute.