The Ifo institute said Wednesday that its confidence index dropped to 104.7 points for September from 106.3 last month as the mood among executives darkened regarding both the current situation and the outlook for the next six months.
The fall took the index, a closely watched economic indicator, to its lowest level since April 2013. It was also bigger than anticipated — the consensus in the markets was for a more modest fall to 105.8.
Ifo president Hans-Werner Sinn said "hardly any stimulus is expected from export business." Exports are a key driver of the German economy.
Though exports have stagnated, the German economy remains strong domestically, with low unemployment and rising wages. Even so, it shrank by a quarterly rate of 0.2 per cent in the second quarter. However, it is expected to return to growth in the third.
Ifo's survey is based on responses from about 7,000 companies in various sectors.