The mood among German firms has brightened for the fourth month running this month amid signs that the worst may be over for Europe's biggest economy.
A separate survey showed that buying managers' activity in the euro zone steadied in July for the fifth month running to the highest level for 10 months.
The German Ifo institute's business climate index for July rose to 87.3 points, beating market expectations of 86.5 points and up from 85.9 points in June. It was the highest reading since November 2008.
'Firms are not so unhappy with the current business situation as they were the previous month. Those surveyed are, again, less sceptical about the coming six months. It looks as though the economy is gaining traction,' Ifo said.
The Ifo index measuring sentiment on current conditions among the 7,000 firms polled rose to 84.3 points from 82.4 in June, while for business expectations the reading rose to 90.4 points from 89.5.
Chancellor Angela Merkel's government expects the export-oriented German economy to contract by around 6% this year, second only to Japan among advanced economies.
Euro zone PMI highest since September
The index of euro zone purchasing managers' activity in the manufacturing and services sectors by the Markit survey company put the index at 46.8 points from 44.6 in June, on the basis of a first estimate. This was the highest reading since September 2008 when it stood at 46.9 points.
But the survey continues to reflect underlying weakness in these sectors because only a reading above 50 points signals expansion. The index has been below 50 for 14 months in a row.
In the manufacturing sector, the index surged to 46 points from 42.6 points in June, the highest level for 11 months. In the services sector, it firmed to 45.6 points from 44.7 in June.
