German industry has shown its resilience in the face of the global credit squeeze with business confidence in Europe’s largest economy rising unexpectedly this month, according to a closely-watched survey released on Tuesday.

The increase in the Munich-based Ifo’s business climate index will damp speculation that the European Central Bank might be forced to cut its main interest rate next year. It suggested that economic growth was only gradually slowing – despite the euro’s rise to record levels and higher borrowing costs.