A preliminary purchasing manager's index compiled by Markit and published on Monday showed activity in Germany's manufacturing sector had fallen to a 15 month low in February, contributing to the wider slowdown in factory and services activity in the euro zone.
On Tuesday, it was confirmed that Germany's economy expanded 0.3 percent in the fourth quarter from the previous quarter, a growth rate that could prompt more concerns over the state of the economy's health.
Carsten Brseski, chief economist at ING-DiBa, said the latest Ifo sruvey was a "wake-up call."
"Global events have finally reached German companies' boardrooms," he said in a note on Tuesday. "All in all, today's Ifo index sends a strong wake-up call to the German economy: the easy and carefree life on the 'island of happiness' seems to be coming to an end."
"For the time being, solid domestic activity should avoid any real negative surprises. Growth on the back of the public sector, consumption and construction activity might shield the German economy from external headwinds, but is clearly not a strategy for sustainable growth in the medium run. Just ask the majority of Germany's euro zone peers," Brzeski warned.