BERLIN - German business morale brightened in January as Europe's largest economy started the new year with easing inflation and an improved outlook, a survey said on Wednesday.
The Ifo institute said its business climate index rose to 90.2, in line with consensus according to a poll of analysts and up from a reading of 88.6 in December.
"The German economy is starting the new year with more confidence," Ifo's president Clemens Fuest said.
The increase is driven by considerably less pessimistic expectations, while companies were, however, somewhat less satisfied with their current situation, Ifo said.
"There probably won't be a recession, but GDP could shrink slightly in the first quarter," Ifo's economist Klaus Wohlrabe said.
Ifo's increase is in line with the optimistic signals of other economic indicators, such as Germany's consumer sentiment, which is set to consolidate its upward trend in February, or the German flash composite Purchasing Managers' Index, which rose for the third consecutive month in January.
(Reporting by Miranda Murray, Rachel More, Rene Wagner, Klaus Lauer. Writing by Maria Martinez, editing by Kirsti Knolle)