German business confidence fell sharply to the lowest level for more than two years in December, the Ifo Institute for Economic Research (Ifo) found on Tuesday.

The latest Ifo Business Climate Index declined for the fourth time in a row to 101.0, down from 102.0 last month.

The index is based on a monthly survey by the Munich-based institute of around 9,000 managers at German companies from all sectors of the economy.

"This year's gift giving on Christmas Eve for the German economy will be meager," Ifo president Clemens Fuest commented.

Last Thursday, head of economic forecasting at Ifo, Timo Wollmershaeuser said that "we have entered a phase of cooling down." Lots of economic institutes in Germany have recently lowered their forecasts for Germany's gross domestic product.

However, the business climate in the construction industry remained at "a very high level" of the previous month. The construction companies once again assessed their current situation "somewhat better", Fuest added.