FRANKFURT, July 15, 2008 (AFP) - German investor confidence hit a record low in July, a key survey showed Tuesday, but most analysts declined to forecast a recession even as high oil prices and a strong euro weighed on the economy.

The ZEW research institute said its index of economic sentiment fell 11.5 points to minus 63.9 points, the lowest level since the survey began in December 1991, in findings that also reflected concerns over the US outlook.

The previous low was minus 62.2 points, hit while the biggest European economy was in recession in December 1992, a ZEW spokesman told AFP.

'High oil prices, the strong euro, the crisis in the United States, an interest rate hike by the European Central Bank and weak domestic consumer demand are likely to put pressure on German companies in the coming six months,' a ZEW statement said.

The European single currency jumped to record highs above 1.60 dollars Tuesday on mounting investor fears about the US economy in the fallout from the subprime home loan debacle which has ravaged the banking system, dealers said.

ZEW president Wolfgang Franz said 'the current problems of US mortgage banks demonstrate that the financial crisis is not over yet.

Another index for the 15-nation eurozone's economy fell 11 points to a series low of minus 63.7 points, the third largest fall in that indicator.

A negative level indicates that financial specialists expect the economy to decline in the coming half year.

Sub-indices that measure sentiment regarding the current situation also fell sharply, by 20.6 points to 17 points for Germany, and by 11.2 points to minus 3.3 points for the eurozone.

'The precipitous fall in the (German) current situation component is important, in our view, as it signals a similar weakening in the respective Ifo component over the coming months,' said UBS economist Martin Lueck.

The Ifo index, a measure of business sentiment that is Germany's leading economic indicator, is to be released on July 24.

The ZEW survey also underscored German industrial order and production data that has many analysts saying the economy could contract in the second quarter.

Bank of America economist Holger Schmieding stood out among his peers by pointing to a possibility the economy might even contract for two quarters in a row -- technically putting it in a recession.

'It may soon be teetering on the brink of recession,' he warned.

Others were reluctant to go that far.

At Uni Credit Markets, economist Andreas Rees said: 'Yes, the recession risk has risen. But no, we do not scribble our name below the R-word for three reasons.'

He noted the survey had already signalled recessions that did not materialise in the past and said a backlog of industrial orders would keep German firms going in the coming months.

Thirdly, the Ifo business survey 'paints a far less pessimistic picture,' Rees said.

Financial markets have been battered in the past week by sharp falls in the shares of US mortgage-finance giants Fannie Mae and Freddie Mac.

Investment bank Lehman Brothers has faltered badly too on falling confidence in the banking sector while California-based bank IndyMac was taken over by federal regulators last week to prevent its collapse.

'The financial market crisis is no doubt partly to blame for the ZEW falling so far as those polled are in daily contact with market developments,' said Commerzbank analyst Matthias Rubisch.

He forecast 'moderate growth over the rest of the year' and an economic expansion of just one percent in 2009.

Many analysts said signs were growing the European Central Bank would lower its interest rates sometime in 2009 although Schmieding said 'the ECB is very unlikely, in our view, to even consider such a rate cut' early in the year.