Europe’s biggest economy shrank by 0.1pc in the three months to the end of September. Analysts now widely believe the trend continued at the end of this year, pushing the economy into a technical recession, defined as two straight quarters of decline.

“We expect the current state of stagnation and shallow recession to continue,” Mr Brzeski added. “In fact, the risk that 2024 will be another year of recession has clearly increased.

“It would be the first time since the early 2000s that Germany has gone through a two-year recession, even though it could prove to be a shallow one.” 

The Ifo index showed weakness was widespread, with manufacturing and construction suffering notable declines. Housebuilding in Germany has collapsed amid higher interest rates and falling house prices which have led to a string of construction projects being cancelled.

Ifo’s business climate in construction is close to a record low, with roughly half of businesses in the sector now expecting business to get worse in the coming months.

Paolo Grignani, a senior economist at Oxford Economics, said the Ifo index painted a “bleak year-end picture for the German economy and sets the stage for a weak start to next year”.

He added that interest rate cuts were likely to come sooner rather than later to support the economy.

“It’s another sign that the economy is still in the mire and that a meaningful recovery in 2024 is far from a done deal,”  Mr Grignani said.

“This is likely to further support the dovish members of the ECB’s governing council in pushing for a relatively quick policy pivot, which we expect will allow for the first rate cut in April 2024.”