German business confidence is back at its highest level in four years after a wobble at the start of the year, according to a closely-watched survey by the Institute for Economic Research (Ifo).

The Institute’s overall business climate index climbed to 111 from January’s 109.8. Economists had expected the measure to fall further to 109.6. The 111 reading matched December’s four-year high.

“After making a cautious start to the year, the German economy is back on track,” said Clemens Fuest, president of the Ifo Institute.

Manufacturing was the brightest spot in the survey, with manufacturers “far more satisfied” with their current business situation. However, there was a downturn in the business climate in the construction sector, with firms reporting constraints due to bad weather in February, while retailers were also more cautious.

A separate survey yesterday indicated that business activity in the eurozone’s largest economy hit its strongest level in nearly three years in February, with Markit’s Purchasing Managers’ Index for the German private sector beating expectations to hit 56.1, with any reading above 50 indicating growth.

Germany’s consumer price inflation hit 1.9 per cent in January compared to the same month in 2016 – the highest level in four years – while annual producer price inflation more than doubled to hit 2.4 per cent last month.

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