The figures showed that the economy in Germany - often referred to as Europe's growth engine - had contracted for the first time in over a year in the second quarter. It showed a marked slowdown from the January to March period, when the economy grew strongly.
Wohlrabe told Reuters that Ifo was now likely to reduce its GDP forecast for the country to 1.5 percent growth, down from the 2 percent predicted.
But Carsten Brzeski, senior economist at ING, said expectations for the German economy remain relatively high, amid hopes that there could be a rebound in the third quarter.
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"Admittedly, confidence indicators recently lost some of their predictive power. However, at least when it comes to Germany, this divergence of soft and hard indicators could possibly be explained by the winter weather and its impact on the construction sector as well as the unusual amount of bridge days in May," he said in a note.
"All in all, today's Ifo index illustrates that German business leaders are somewhat more down-to-earth than financial market participants. Both the latest PMI and the Ifo reading actually give hope that the disappointing second quarter performance will not morph into an unintended longer period of disappointment. At least not for now," he added.
—By CNBC's Jenny Cosgrave: Follow her on Twitter