German business confidence has risen unexpectedly, strengthening the European Central Bank's argument that global financial turmoil might have no "sizeable" impact on the eurozone economy.

The increase in Germany's Ifo business climate index for February, powered largely by an improvement in retailers' confidence, was the latest evidence suggesting that no dramatic collapse in growth is imminent across the 15-country eurozone. The upbeat picture was marred by data showing an unexpectedly sharp 0.8 per cent contraction in German consumer spending in the final quarter of last year - before the period covered by the Ifo survey. That highlighted a weak spot in Europe's largest economy, which, if not reversed this year, could undermine policymakers' hopes that the eurozone will avoid significant fallout from the weakening US economy.