German investor confidence declined to the lowest level since 2012 as the crisis in Ukraine and a sluggish euro-area recovery dampen the outlook for Europe's largest economy. The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, dropped to 8.6 this month from 27.1 in July. Economists forecast a decrease to 17, according to the estimate in a survey. The gauge has slipped every month since reaching a seven-year high in December. German gross domestic product probably fell last quarter for the first time since 2012, and escalating international sanctions against Russia over its support for rebels in Ukraine are undermining the outlook for coming months. That threatens to weigh on the revival in the euro area, which has already seen Italy slip back into recession. "The German economy has been a little bit weaker than we thought in the second quarter," said Anatoli Annenkov, senior economist at Societe Generale in London. "What is difficult is to determine how much of it is a Russia effect." A gauge of current conditions declined to 44.3 from 61.8 the previous month, ZEW said. A measure of expectations for the euro area plunged to 23.7 from 48.1. "The decline in economic sentiment is likely to be connected to the ongoing geopolitical tensions that have affected the German economy," ZEW said. "Since the economy in the euro zone is not gaining momentum either, the signs are that economic growth in Germany will be weaker in 2014 than expected." The European Union agreed last month to curb Russia's access to bank financing and advanced technology in its widest-ranging sanctions yet. Dusseldorf-based Rheinmetall reduced its 2014 profit forecast after the German government blocked a contract to build a military training centre east of Moscow. Fraport, the operator of Frankfurt's airport, cut its retail outlook after the number of Russians departing Europe's third-busiest hub fell 3.8 per cent in the first half. The Bundesbank has predicted German growth of 1.9 per cent this year and 2 per cent in 2015.