German business confidence hits 10-month high: Ifo

The Ifo institute's closely watched business climate index for Europe's top economy rose to 107.4 points in February -- the highest reading since April 2012 -- from 104.3 points a month earlier.

Economists polled by Dow Jones Newswires had been pencilling in a more modest rise to 14.7 points.

"The German economy is regaining momentum," said Ifo president Hans-Werner Sinn.

"Satisfaction with the current business situation continued to grow. Survey participants also expressed greater optimism about their future business perspectives," Sinn said.

Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.

The sub-index measuring current business rose to 110.2 points in February from 108.1 points in January. And the outlook sub-index four whole points to 104.6 points, its highest reading since July 2011.

Analysts said the renewed surprisingly strong rise in the Ifo index suggests that the dip in the German economy at the end of last year -- when falling exports caused gross domestic product to contract by 0.6 percent -- will be short-lived.

"The wow effect. Nothing seems to be able to stop German business optimism," said ING Belgium economist Carsten Brzeski.

"The evidence is increasing that the contraction in the fourth quarter has been a one-off which never felt anything near a recession," the expert said.

With the improved outlook for the US and Chinese economies -- two of Germany's biggest export markets -- "prospects for German exporters are clearing," Brzeski said.

"While most other eurozone countries are moaning under the burdens of reforms, austerity and recession, the German economy continues playing in a league of its own," he said.

But Jennifer McKeown at Capital Economics was more cautious.

"With worries about the periphery continuing and the still high level of the euro casting a shadow over Germany's export prospects, we think that the recovery will be modest and uneven," she warned.