German confidence hits its highest since reunification

German business confidence has risen to a new two-decade high, exceeding expectations as an increasingly broad-based recovery in Europe's biggest economy shows no signs of slacking.

The Ifo institute's monthly confidence index rose to 110.3 points in January from 109.8 in December. It was the eighth consecutive increase, the highest figure since Ifo started measuring business confidence in reunited Germany in 1991.

The German economy rebounded strongly in 2010, growing by 3.6 per cent as a recovering global economy fuelled a surge in exports - a traditional German strength - and domestic demand showed signs of improvement. The government this week raised its growth forecast for 2011 to 2.3 per cent from 1.8 per cent. Manufacturers led the brighter outlook.

"German fundamentals are currently simply too strong to derail the recovery any time soon," ING economist Carsten Brzeski said. "The diversified export mix, the labour market and a strengthening of private consumption should put growth in 2011 on a broad footing."

Andreas Rees, an economist at UniCredit, said he was sticking to a growth forecast for Germany of 2.5 per cent this year - although "one should not exclude an even stronger figure".

Germany's strong performance has pulled up overall growth in the 17-nation eurozone.