Investors’ gloom over German economic prospects has lifted this month, with recession fears receding, according to a closely-watched survey.

The improvement in the Mannheim-based ZEW institute’s economic sentiment indicator – by 8.4 points in August to minus 55.5 points – added to evidence that Europe’s largest economy might be over the worst of the economic downturn. German gross domestic product had contracted by 0.5 per cent in the three months to June, figures showed last week.