Investor sentiment in Germany rose by more than expected in January on improved expectations for exports, buoying the outlook for Europe's largest economy, the ZEW economic research institute said today. 

The survey of investor economic sentiment increased to 61.8 from 55 points the previous month, ZEW said. A Reuters poll had forecast a rise to 60.

"Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly," ZEW President Achim Wambach said in a statement.

"The results of the ZEW Financial Market Survey in January show that export expectations in particular have risen significantly," he said. 

A separate gauge of current conditions edged up to -66.4 from -66.5 points the previous month. That compared with a consensus forecast of -68.5 points. 

Germany's economy shrank by 5% in 2020, less than expected and a smaller contraction than during the global financial crisis. 

Unprecedented government rescue and stimulus measures helped lessen the shock of the Covid-19 pandemic. 

The Bundesbank said yesterday that the economy is managing to stay afloat but could suffer a "sizeable setback" if coronavirus curbs are extended again. 

Chancellor Angela Merkel is set to agree with regional leaders to extend a lockdown for most shops and schools until mid-February as part of a package of steps to try to rein in the coronavirus, sources said before talks today. 

Earlier this month, Daimler chief executive Ola Kaellenius said the German carmaker was starting the year with optimism after a strong finish to 2020.