German business confidence is at its highest for nearly three years, according to the latest report from the Ifo economics institute.

The body's closely watched west German business sentiment index rose from 95.7 last month to a better-than-expected 96.8 in December -- its highest level since January 2001 and the eighth successive monthly increase.

The rise reflected a nine-year high in business expectations. The component measuring confidence in the future rose by 2.3 points to 111 this month, the best reading since November 1994.

However, the gauge of attitudes towards the current climate climbed only marginally to 83.3, still below the long-term survey average.

Ifo president Hans-Werner Sinn emphasised the positive findings. "The renewed improvement in the business climate index in west Germany confirms the expectations of the Ifo institute that the economic recovery has set in and is gaining strength," he said. "The surveyed sectors that have lagged behind are now also beginning to recover."

Data sourced from: The Wall Street Journal Online; additional content by WARC staff