Germany's key Ifo business climate index fell for the seventh month in a row in December in a sign that concern about slowing US growth dampened sentiment and a top Ifo economist saw further declines ahead.
The Ifo institute's monthly survey published on Monday showed that the closely watched headline west German index fell to 96.5 from 97.0 in November, broadly in line with market consensus expectation of 96.6.
Ifo head of surveys Gernot Nerb said in an interview that the German economy was likely to continue slowing for some time and that the December survey showed business expectations have turned clearly negative.
The euro, which fell half a cent in anticipation of the weaker Ifo reading fell further after the data and hovered just above 93 cents.
The index reached its lowest level since October 1999 reading of 96.0 after steadily slipping from a nine-year high of 102.0 in May.
The overall number came in as expected and has evidently fallen because of worsening expectations of the United States and the strengthening Euro, said Hans Juergen-Meltzer of Deutsche Bank Research.
He expected the Ifo index to fall further in January due to expectations of a sharp slowdown in US growth.
The west German current conditions index fell to 92.0 from 92.4 in November, while the expectations index fell to 101.1 from 101.6.
The main index for east Germany fell to 105.1 from a revised 106.4 reading in November. The current conditions sub-index fell to 125.2 from 125.3 and the expectations index dipped to 86.3 from 88.5.
The weak Ifo reading is likely to reinforce expectations that the European Central Bank will have to respond to signs of weakening euro zone growth with an interest rate cut some time in the first half of this year.
But Nerb, who has earlier pleaded for the ECB to hold off with any further interest rate increases, now said there was no pressing need for the central bank to lower rates.