The closely-watched monthly business confidence index published by the Munich-based Institute for Economic Research (ifo) jumped to 108.3 points in January, up from 107.3 points in December.

"The German economy is starting the new year with vigor," said ifo president Hans-Werner Sinn as he presented the latest survey.

This month's increase easily beat analysts' forecasts of a more modest rise as fears of an expanded eurozone debt crisis continue to loom large.

The ifo index is based on a poll of 7,000 German business leaders. Its January result marks the third monthly gain in a row, which is traditionally interpreted by analysts as a reliable trend.

Bucking the trend

With most of the eurozone countries bound for a mild recession, Germany is expected to post 0.3 percent growth this year. "There are no signs whatsoever that Germany is sliding into a deep recession," Unicredit economist Andreas Rees told Reuters news agency.

"Cyclical developments are starting to look positive again, and there's good reason to be optimistic," Rees added.

Ifo's sentiment survey showed that the business climate had been particularly upbeat in the manufacturing and building industries. Companies in the metal-working sector are hoping to boost their exports again. "Export chances are being assessed more positively again," said ifo economist Klaus Abberger in an interview with Reuters. "And the relatively weak euro has contributed to this."

Business confidence appeared less pronounced in the retail and wholesale sectors. Once again, the ifo survey for January revealed an interesting phenomenon. While the business sentiment index rose considerably, the sub-component measuring how companies assess their current conditions declined slightly to 116.3 points, down from 116.7 points in December.

Author: Hardy Graupner (Reuters, dpa, AFP)
Editor: Michael Lawton