The mood among German investors improved further in May to reach its highest since July 2015, a further sign that political uncertainties which clouded the growth outlook for Europe's biggest economy are fading.
The Mannheim-based ZEW research institute said its monthly survey showed its economic sentiment index rose to 20.6 from 19.5 points in the previous month.
The Reuters consensus forecast was for a rise to 22.
The positive sentiment reading came as the economy picked up speed in the first quarter of 2017.
Companies invested more, consumers and the state continued to spend and exports soared despite the threat of rising protectionism.
Germany's economy, Europe's biggest, grew by 0.6% in the quarter from the previous three month period, when it expanded 0.4%, the Federal Statistics Office said last week.
"The latest figures on gross domestic product confirm that the German economy is in good shape," ZEW President Achim Wambach said in a statement.
"The prospects for the euro zone as a whole are gradually improving, further strengthening the economic environment for German exports," he added.
A separate gauge measuring investors' assessment of the economy's current conditions rose to 83.9 points from 80.1 in April. This compared with the Reuters consensus forecast which predicted a reading of 82.
The upbeat ZEW report is the latest in a batch of solid data on the German economy.
