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By Krista Hughes
MANNHEIM, Germany, April 21 (Reuters) - Government stimulus measures and low inflation helped boost German analyst and investor sentiment to its highest level in almost two years in April, suggesting an end to the recession may be in sight.
The Mannheim-based ZEW economic think tank said on Tuesday its monthly poll of economic sentiment rose to 13.0 from -3.5 in March, showing its first positive reading since July 2007, which was just before the global credit crunch erupted.
April's rise took the headline index to its highest level since June 2007, shooting well past the 1.5 consensus forecast and adding to signs that the worst of the downturn may be over in Europe's biggest economy.
"The main reason for improved sentiment is the hope that fiscal measures introduced to fight the economic crisis are taking effect," said economist Andreas Rees from Unicredit.
"The end of the recession will be in the autumn of this year. Investors are gradually seeing light at the end of the tunnel," he added.
The euro pushed up to session highs just under $1.30 briefly following the release, and euro zone government bonds pared gains.
The ZEW report comes days before two other German indicators are expected to show slight improvements -- both a purchasing managers' survey due on Thursday and Friday's business climate index from the Ifo institute are seen edging up in April.
In another sign of economic recovery, the head of engineering sector association VDMA told Reuters last week that Germany's plant and equipment industry, the country's largest industrial employer, is seeing early signs of stabilisation.
TRYING TO FIND A BOTTOM
The ZEW survey was not entirely upbeat -- a separate index measuring current conditions hit its lowest level since September 2003, falling to -91.6 from -89.4 and undercutting the consensus forecast for a drop to -90.0.
Carsten Brzeski, economist at ING Financial Markets, described the survey as good news but said there were no grounds for excessive enthusiasm, pointing out that the headline indicator remained well below its historical average.
"There are some glimmers of hope," he added. "The deterioration of the real economy is slowing down and mixed signals from confidence indicators show that at least confidence is trying to find a bottom."
The German economy is suffering from a collapse in global demand that has led manufacturing orders to fall nearly every month since the end of 2007, with the slump accelerating rapidly since last September.
Economists have slashed Germany's 2009 growth forecasts in recent weeks, and Finance Minister Peer Steinbrueck said last month the government could no longer keep its forecast for a contraction of 2.25 percent this year.
The downcast environment has led to a shake-up in several industries, with many employers switching workers to part-time shifts. Some companies are restructuring their businesses.
On Monday, debt-laden German retailer Arcandor said it would ditch its premium department stores to reposition itself downmarket and focus on sales to a broader target group.
Europe's largest economy shrank by 2.1 percent on the quarter in the last three months of 2008 -- the sharpest quarterly contraction since Germany reunified in 1990.
Last week, the Economy Ministry said the contraction probably intensified in the first quarter of this year. (Additional reporting by Andreas Framke, writing by Brian Rohan; editing by Stephen Nisbet)