German business morale rose unexpectedly in December despite Europe's biggest economy going into a strict lockdown to contain a second wave of coronavirus infections, a survey showed today. 

The Ifo institute said its business climate index rose to 92.1 from an upwardly revised reading of 90.9 in November.

Ifo linked the improvement mainly to manufacturers logging high volumes of orders and an improvement in export expectations. 

"Companies were satisfied with their business situation," Ifo President Clemens Fuest said. 

"They are looking at the first half of the year with less scepticism. But the lockdown is hitting some branches hard. The German economy is on the whole showing its resilience," he added. 

Germany imposed a hard lockdown on December 16 that forced all non-essential businesses to shut in order to bring down stubbornly high infection numbers and record high deaths. 

Ifo said only 20% of companies it surveyed sent their responses after Germany took the decision last weekend to go into lockdown. 

But the new tightening in coronavirus restrictions means that activity will remain subdued at the start of next year before picking up in the second quarter. 

Melanie Debono, Europe Economist at Capital Economics, said the survey suggest that Germany could avoid a contraction in the fourth quarter. 

"All told, the recent tightening in lockdown measures means that services and retail activity will continue to struggle in the near term," she said in a note to clients. 

"But, on balance, we now think that Germany's economy may expand a touch in Q4 thanks to the continued strong growth in industry," she added.