German business morale fell more than expected in July as high energy prices and impending gas shortages push Europe's largest economy to the cusp of recession, a survey showed on Monday.

The Ifo institute said its business climax index was 88.6, its lowest level in more than two years. June had also seen an unexpected drop to a downwardly revised reading of 92.2.

A Reuters poll of analysts had pointed to a July reading of 90.2.

Companies are expecting business to significantly worsen in the coming months, with pessimism especially noticeable in the manufacturing sector at -7.1 in July, versus a reading of 0.0 in June. (Reporting by Rachel More and Miranda Murray)