German business sentiment at highest levels in two-and-a-half years

A clean bill of health for the German economy this morning.

The Ifo survey has beaten or matched analyst expectations across the board. The headline business climate index is up to its highest level since July 2011 at 110.6, up from 109.5 prior.

But Johnathan Loynes, chief European economist at Capital Economics, says that the Ifo "has tended to over-do the actual strength of the economy over recent quarters".

While the indices are consistent with annual GDP growth above two per cent, present estimates suggest that GDP grew by a modest 0.3 per cent in the final quarter of 2013.

Current assessment and expectations came in at 112.4 from 111.6 and 108.9 from 107.4, respectively.

Capital Economics now expect German GDP growth to accelerate from 0.5 per cent last year to around 1.5 per cent in 2014.