German investor confidence weakened more than expected in August, posting its strongest decline in two years, a survey showed Tuesday, as hopes for recovery in Europe's largest but struggling economy remain out of reach.

The ZEW Institute's closely watched economic expectations index fell to 19.2 points, a steep drop of 22.6 points from a month earlier.

Analysts surveyed by financial data firm FactSet had predicted a smaller decline, to 34.3 points. The analysts polled by Reuters had pointed to a reading of 32.0.

"The economic outlook for Germany is breaking down," ZEW president Achim Wambach said in a statement.

The August reading marked "the strongest decline of the economic expectations over the past two years," he added.

"It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the U.S. economy and growing concerns over an escalation of the conflict in the Middle East," Wambach said.

"Most recently, this uncertainty expressed itself in turmoil on international stock markets," he added.

Germany, traditionally a driver of European growth, was the only major advanced economy to shrink in 2023 as it battled high inflation, an industrial slowdown and cooling export demand.

The government expects the economy to grow slightly in 2024 on the back of easing inflation, but an unexpected contraction of output in the second quarter and a string of weak indicators have recently darkened the outlook.

The assessment of the current economic situation in Germany also declined, falling to minus 77.3 points from minus 68.9 in the previous month.

"The ZEW survey confirms the impression that the German economy is struggling to get back on its feet," said Deutsche Bank economist Robin Winkler.