The confidence of German investors collapsed in September as they took greater notice of risks to economic growth than previously, the ZEW survey showed.
The ZEW institute's sentiment indicator, based on a survey of 277 analysts and institutional investors, plunged 18.3 points to -4.3 points, its fifth consecutive monthly drop and its second unexpectedly sharp loss in a row.
In August, the volatile indicator had posted a bigger than expected fall to 14 points, and analysts had forecast it would remain stable at that level this time around.
The latest data on industrial output from Europe's biggest economy showed it edging higher by 0.1% in July from June, after a sharp drop in orders suggested that the economy could be coming off the boil.
The data indicated that Europe's biggest economy was slowing down slightly following record quarterly growth of 2.2% in the second quarter of the year.
