A key indicator of German business confidence has raised hopes that Europe's largest economy has seen the worst of the current downturn.

The business climate index prepared by Germany¿s Ifo economics institute rose to a level of 91.8 this month, from 86.4 in January.

"Under normal conditions, the upswing should set in now," said Ifo economist Gernot Nerb, although he cautioned that more evidence was needed before making a firm prediction.

The index figure hit an eight-year low of 84.7 after the 11 September attacks on the US.