Economic Confidence

The improved figures have boosted hopes of a turnaround in Europe's biggest economy later in the year.

On Tuesday, the Mannheim-based Center for European Economic Research (ZEW) said the index posted its biggest rise in around 16 years in February, edging up to minus 3.5 points this month from minus 5.8 last month.

That puts investor confidence at its highest reading since July 2007. This is still well below its historical average of 26.2 points however. The European single currency climbed Tuesday after the release of the closely-watched ZEW survey.

Economists surveyed by financial news agency Bloomberg had expected a drop to minus eight points, reflecting plummeting global demand for German exports. However, analysts surveyed by Dow Jones Newswires had forecast a gain to minus 2.8.

Recession "phasing out"

The ZEW said in a statement that the indicator's upward movement had been dynamic during the last four months, but had slowed down in March.

"However, the impression strengthens that the experts are more hopeful with respect to the economic development in Germany on a six-months time horizon," the statement said. "The renewed interest-rate cut by the ECB and lower prices for raw materials and food may explain the experts' more optimistic view."

ZEW president Wolfgang Franz said the economic slowdown was "gradually phasing out," and that the bottom of the recession would likely be reached this summer.

"The economic situation is extremely bad, but there are the first signs of hope. They should not be played down."

False expectations

But Kenneth Broux, an economist at Lloyds Banking Group in London, told Bloomberg there was still no foreseeable end to the global recession in sight.

"Expectations are getting ahead of themselves," he said. "Investors are looking at equity markets to provide a slightly more confident outlook, but in the economy there's no sign that we're near the bottom."

The ZEW index measures the mood among around 300 analysts and institutional investors. The indicator often sets the scene for other major European economic sentiment surveys released later in the month, including Germany's closely watched Ifo business confidence survey.

The March increase came despite a steady stream of bleak economic data showing that German exports, industrial production and factory orders were falling more sharply than predicted by economists.