German business confidence rose for a fourth consecutive month in August, data showed Tuesday, boosted by a stronger export outlook and adding to signs of a pickup in Europe's top economy.
The Ifo economic institute's closely watched business climate index rose to 107.5 points this month from 106.2 in July, in a move likely to provide a boost to Chancellor Angela Merkel a month before general elections.
Analysts polled by Dow Jones Newswires had predicted an increase, albeit slightly lower, to 107 points.
"Companies are more satisfied with their current business situation. Their optimism regarding future business developments -- although slightly cautious -- also grew," the think tank's economist Kai Carstensen said in a statement.
"The German economy moved up a gear."
Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.
The figures offer further cheer to the German economy after gross domestic product (GDP) expanded by a stronger-than-expected 0.7 percent in the second quarter following zero growth in the first quarter.
Growth was driven mainly by domestic demand, with consumer spending and public expenditure both on the rise, and investment was also up on the previous quarter.
The Bundesbank said in its June monthly report that German GDP would expand by 0.3 percent in 2013, while the International Monetary Fund has cut in half its forecast for German growth this year, also to 0.3 percent.
Companies' sentiment on both expectation and the current assessment of their business situation rose in August, Ifo said.
The sub-index measuring current business increased to 112 points in August from 110.1 points last month, while the outlook sub-index edged up to 103.3 points from 102.4 points.
With the battered eurozone now climbing out of recession, the German business climate in manufacturing rose "significantly", reaching its highest level since April 2012, the Ifo indicator showed.
"Assessments of the current business situation were considerably better than last month. Business expectations also continued to brighten," Carstensen said.
"Firms expect stronger impulses from export business," he added.
While the business climate index in wholesales improved, it edged downwards in retailing and fell in construction.
Berenberg bank economist Christian Schulz noted that the export outlook was "brightening" despite difficulties for emerging markets, a slowdown in China and tough Japanese competition.
"Stabilising eurozone and growing US demand, which together account for two-thirds of German goods exports, should offset weaker developments elsewhere," he said.
Jennifer McKeown, an economist at Capital Economics, said the sharper-than-expected rise "adds to encouraging signs that the economy is recovering".
But she said the fall in the construction index seemed to indicate that the sharp second-quarter rise in activity "was a temporary bounceback from bad weather" in the previous three-month period.
"And the fall in the retail index is a reminder not to put too much faith in German consumers. Nonetheless, it seems that a moderate recovery is finally underway," she said.
UniCredit economist Alexander Koch said the data indicated a bright horizon.
"Looking ahead, the latest business sentiment readings confirm our view that the German economy will be able to maintain a somewhat more moderate but still robust momentum in the second half of 2013 following the exceptional rebound in the spring," he said.