The Outlook For Germany In One Word: 'Grim'

The ZEW investor confidence survey index plunged to 44.3 in August from 61.8 a month ago. This was much worse than the 54.0 expected by economists.

To make things worse, the expectations index crashed to 8.6 from 27.1. This was the lowest reading since December 2012. Economists were expecting 17.0.

"In one line: Grim, as slump in investor sentiment deepens," said Pantheon Economics' Claus Vistesen. "Given the recent sharp drawdown in equities, a drop in sentiment was expected, but the decline was larger than anticipated, reinforcing downside risk to the economy."

Some of this deterioration is likely due to the escalating conflict with Russia, which recently imposed a ban on food imports from the European Union.

"The German ZEW survey suggests the euro-area economy will continue to slow through the first half of next year," said Bloomberg economists David Powell and Niraj Shah. "That will provide ammunition for the proponents of quantitative easing at the European Central Bank."