Berlin  - The mood among German investors remains downcast, a key indicator to be released Tuesday is forecast to show, with the survey representing a key test of sentiment in Europe's biggest economy amid the fallout from the world financial crisis.

Drawn up by the Mannheim-based Centre for European Economic Research, the ZEW index is forecast by analysts to have edged up slightly from minus 63 in October to minus 62 this month after signs that an element of calm has returned to global share markets after weeks of chaotic selling.

Also helping to steady the nerves of investors has been the 50- billion-euro (65 billion dollar) economic stimulus plan and the 500-billion-euro bank rescue package unveiled by Chancellor Angela Merkel's government in recent weeks.

However, the release of the index comes as part of the buildup to the publication on Thursday of official data showing Germany slumping into a recession during the third quarter.

After shrinking by 0.5 per cent in the second quarter, the German economy contracted by 0.1 per cent during the three months to the end of September, analysts expect the figures to be released by Germany's statistics office will show.

As a result, Germany will fulfil the technical definition of recession after clocking up two consecutive negative quarterly economic growth rates.

Last week, Germany's Economic Ministry said the nation's factory orders plummeted in September by a dramatic 8 per cent to record their biggest drop since records began about 17 years ago, while industrial production sunk 3.6 per cent in September.

However, German exports posted a modest month-on-month rise of 0.7 per cent in September as a weaker euro helped to boost foreign orders for the world's leading export nation.

Data to be published on Friday is also predicted to show France - the 15-member eurozone's second biggest economy - also slipped into recession during the third quarter.

With the eurozone's two largest economies in recession, the European Central Bank is likely to face mounting pressure to follow up this month's 50-basis-points cut with another hefty reduction in borrowing costs in December.

The release of the ZEW survey also comes in the run-up to a summit of the Group of 20 (G20) world's biggest economies in Washington at the end of the week which has been called to launch plans for a major overhaul of the global financial sector.

While analysts predict that ZEW survey might indicate a slight improvement in investors' assessment of the German business outlook six months down the track, the indicator's component gauging current economic conditions is likely to have fallen sharply.

The release of the ZEW survey comes after the index plunged in October amid deepening economic fears and following a share market sell off.

In particular, ZEW survey helps sets the stage for the release later this month of Germany's closely watched Ifo business confidence survey. (dpa)