German business morale was surprisingly buoyant this month, supporting expectations of a robust start to 2017 in Germany and the euro zone despite worries about US trade policies, Brexit and the French election.
The sentiment survey, published by the Ifo institute today, was another sign that growth in the euro zone is picking up.
Yesterday, preliminary purchasing manager surveys for Germany, France and the whole 19-member euro zone were nearly all better than expected.
There is a relatively strong correlation between German economic growth and that of the euro zone.
"The mood defies the risks posed by Trump and the French presidential elections - especially because consumption is strong," Commerzbank Chief Economist Joerg Kraemer said.
The US has become the biggest client for "Made in Germany" products, taking nearly 10% of overall exports and propelling Germany's record-high trade surplus.
But US President Donald Trump has threatened German carmakers with a border tax of 35% on imported vehicles imported, arguing that such a step would make them create more jobs on American soil.
In France, Germany's second-most important export destination, the outcome of elections has unnerved investors as anti-euro, far-right leader Marine Le Pen has narrowed the gap with centrist opponents in the race for the presidency.
Bankhaus Lampe economist Alexander Krueger said Mr Trump's protectionist plans did not seem to unsettle German companies for now and that the Ifo figures pointed to strong economic growth in the first quarter.
Munich-based Ifo said its business climate index, based on a monthly survey of some 7,000 companies, rose to 111.0 from an upwardly revised reading of 109.9 in January.
That beat the Reuters consensus forecast for a dip to 109.6.
