The Ifo institute's gauge of German business confidence unexpectedly fell for a second consecutive month in March, signalling a slowing of economic growth as a hoped-for recovery in investment demand failed to materialise.
Munich-based Ifo said today its closely-watched business climate index, based on a monthly survey of some 7,000 firms, dropped to 94.0 - below even the most pessimistic forecast - from a downwardly revised 95.4 in February.
Ifo president Hans-Werner Sinn said evidence had mounted that economic growth in Europe's biggest economy was likely to slow in coming months.
"Especially the hope for a recovery of investment demand has not materialised," he said in a statement.
The business climate declined sharply in manufacturing, although companies indicated the export outlook remained positive, while in retailing the climate also worsened, he added.
Mr Andreas Rees, an economist at HVB Group in Munich, said a recent gain in oil prices was a decisive factor in the deterioration of business confidence as it was eating into consumers' purchasing power and curbing company profits.