Berlin - Business confidence in Germany slipped in March to its lowest point in about 26 years, a key survey released Wednesday said, as boardrooms in Europe's biggest economy face up to the global recession.

Drawn up by the Munich-based Ifo economic research institute, the closely-watched Ifo business confidence index edged down to 82.1 points this month after falling to an 18-year low of 82.6 in February. Analysts had expected the survey to slip to 82.2 points.

Based on a survey of 7,000 German executives, the Ifo report is also a major test of the economic mood in Europe with the nation's key manufacturing sector warning they plan to cut staff numbers as economic demand slumps sharply.

"An economic turning point has not yet been reached, in the opinion of the survey participants," said Ifo chief Hans-Werner Sinn. The March reading as the Ifo index's lowest level since November 1982.

The March index is also likely to add to expectations that the European Central Bank will cut rates again next week in a bid to spur economic growth.

Dragging the index down in March was another sharp fall in the business leaders' assessment of the current economic climate in Germany.

"The continued decline in the current conditions index suggests that the recession might deepen further before we see any improvement," said research group Capital Economics European economist Jennifer McKeown.

At the same time, however, the indicator's component gauging expectations six months down the track gained ground on hopes of an economic upturn later in the year.

This comes in the wake of the slew of major fiscal stimulus plans unveiled by governments around the world and a round of hefty global interest rate cuts.

While the March Ifo indicator gauging current business conditions slumped from 84.3 points in February to 82.7 points this month, the index's expectations component jumped for the third consecutive month to 81.6 in March from 80.9 last month.

But many economists believe that the German economic slowdown could soon start to bottom out, after the implosion of America's Lehman Brothers in September helped to send the world economy into a sharp decline in the last months of 2008.

"While the improved outlook is not strong enough to push the headline index higher, the continuing improvement in the survey's forward looking component is good news," said Morgan Stanley economist Elga Bartsch.

"Overall, however, these tentative signs of stabilization suggest to us that that after the sharp fall in activity over the winter, there is a good chance of a stabilization over the summer," said Bartsch.

Indeed, the release of the Ifo survey follows a batch of more positive readings from other recent economic sentiment surveys.

Considered a bellwether of the mood in the 16-member eurozone economy, Belgium's business confidence survey unexpectedly rose to minus 28.6 points in March from minus 31.6 in February. Analysts had forecast a fall to 32 points.

At the same time, the preliminary composite purchasing managers' index (PMI) for the eurozone, which draws together the manufacturing and services output indices, rose from 36.2 in February to 37.6 in March.

Likewise, while concerns about current business conditions kept Tuesday's French business sentiment survey at record low levels in March, the Paris-based National Institute for Statistics and Economic Studies (INSEE) report showed executives in France cautiously optimistic about the months ahead.

German investor confidence recorded a surprise increase in March to record its fifth consecutive monthly rise, a key indicator released last week showed, amid hopes of further rate cuts and a turnaround in Germany's economy later in the year.

After posting a big jump in February, the Mannheim-based Centre for European Economic Research (ZEW) said its index measuring the sentiment among analysts and institutional investors edged up to minus 3.5 points this month from minus 5.8 last month.

That said, however, disastrous economic data and downward revisions to economic have continued to roll in as key export market dry up, factory order books contract and production plummets.

German exports fell by a massive 20.7-per-cent year-on- year in January, while industrial production plunged by 19.3 per cent and manufacturing orders cascaded down by about 35 per cent.

Commerzbank AG this week forecast that the economy could shrink by a dramatic 6 or 7 per cent this year compared to a previous projection of between 3 and 4 per cent amid a steady stream of downbeat corporate reports.