BERLIN: German business morale rose to its highest level in 20 years in January, surging past economists' forecasts on the back of a manufacturing sector now fully recovered from the 2008 financial crisis. The Munich-based Ifo economic institute said on Friday its business climate index rose to 110.3 from 109.8 in December, the strongest since records started for reunified Germany at the start of 1991 and confounding expectations for a flat reading. Separately, statistics office data in France showed business confidence also rose strongly in the euro zone's second largest economy, boosted by a surge in manufacturing sentiment. "Manufacturers have made a significant leap forward and have now fully recovered from the crisis," Ifo economist Klaus Abberger said in an interview. The Ifo index is based on a monthly survey of some 7,000 firms and is one of Europe's most closely-watched releases by financial markets. The euro extended gains against the dollar to briefly hit a two-month high after the data. "German business confidence surprised and continued its impressive performance of the last two years, increasing to a new record high," said Carsten Brzeski of ING. "The heaviest snowfalls in more than 40 years only weighed on companies' current assessments but not on their optimism." Ifo's index on current conditions inched lower to 112.8 from 112.9 last month, while its expectations reading on the outlook for the next six months rose to 107.8 from 106.8 in December. The upbeat Ifo reading topped off a run of bullish data that has shown the German economy benefiting from a rebound in emerging economies and bucking the trend of other rich nations, including much of the euro zone, who are still struggling. The ZEW survey earlier this week also showed German investors increasingly optimistic and the government has raised its 2011 growth forecast.
