Page last updated at 11:17 GMT, Tuesday, 19 May 2009 12:17 UK

German investor confidence rose for the seventh month in a row, a survey has indicated, raising hopes that the worst of Germany's recession could be over.

The Zew economic sentiment index, which measures expectations of economic activity over the next six months, rose to 31.1 in May from 18.1 in April.

Optimism was supported by modest signs of recovery in recent weeks, Zew said.

However investors' assessment of the current situation remained gloomy, dropping just 1.2 points to -92.8.

The index reflects the difference between the number of analysts that are optimistic on economic activity and those that are pessimistic.

But Zew warned that unemployment could get worse. There are currently 3.46 million people out of work in Germany.

"With regard merely to the economic activity, more and more signs indicate that the worst seems to be over," said Zew president Wolfgang Franz.

"However with regard to the labour market developments the worst still seems to come."

The sectors that investors were most optimistic about were banking and insurance, while they were most pessimistic about the car industry.

"The pick-up in the banking index was an encouraging sign that, contrary to popular belief, investors believe that the worst is past", said Jennifer McKeown, European economist at Capital Economics.

"But expectations for the automobiles sector have deteriorated from a low level, suggesting that investors do not see government car scrapping incentives offsetting the weakness of underlying demand."