German business confidence rose to an 18-month high in January as the global economic recovery boosted the demand for exports.

The Ifo institute, at the University of Munich said its business climate index, based on a survey of 7,000 executives, increased to 95.8 from 94.6 in December - - the highest since July 2008.

The current business situation of the firms has further improved. With regard to the business outlook for the coming half year the surveyed firms are more confident than before. The economic recovery continues at the beginning of the New Year.

In manufacturing, the business climate index has risen noticeably. For the eighth time in succession, the firms have assessed their business situation as less unfavourable. Their business expectations have also brightened. For their export business, they anticipate a clear revival. Although the utilisation of machinery and equipment is still below average, the rate is higher than three months ago. The personnel plans of the manufacturing firms are still geared to some staff reductions.

In retailing, a nearly unchanged business situation has been reported, with retailers somewhat more reserved regarding the six-month outlook than in December. As a result, the business climate in retailing remains largely unchanged.

The business climate in wholesaling has brightened further. The survey participants are once again more satisfied with their business situation. They are also less critical regarding business development in the coming half year.

In construction, the business climate index has risen strongly. Although the surveyed contractors have given slightly more unfavourable assessments of their current business situation than in December, they are clearly less sceptical regarding business in the near future. Currently, however, many firms are complaining about the weather-related constraints on construction activity.