The Mannheim-based ZEW research institute said on Tuesday its monthly survey showed its economic sentiment index rose to 20.4 from 17.4 in December. That compared with the Reuters consensus forecast for a reading of 17.8.
A separate gauge measuring investors' assessment of the economy's current conditions rose to 95.2 from 89.3 last month, hitting its highest level since the survey began in 1991. The Reuters consensus forecast was for a reading of 89.8.
"Private consumption, which was the most important driver of economic growth in 2017, is likely to continue to stimulate growth in the coming six months according to the survey participants," said ZEW president Professor Achim Wambach.
"The assessment of the global economic environment in Europe and the USA is also much more favourable than it was at the end of 2017."
ZEW surveyed 212 analysts and investors in the period Jan. 8-22.
Underlining the strength of sentiment, ZEW said it received the vast majority of replies before Germany's Social Democrats (SPD) voted on Sunday to begin formal coalition talks with Chancellor Angela Merkel's conservatives.
Before the SPD vote, Germany was in political deadlock.
With the vote, Europe's economic powerhouse moved closer to a stable government, which business wants to end the political uncertainty gripping Berlin since a Sept. 24 national election.
Despite the messy political background, Germany is enjoying strong domestic demand helped by record-high employment, rising real wages and low borrowing costs, while its exporters are benefiting from a global economic recovery.
Demonstrating corporate Germany's rude health, chemicals group BASF
Earlier on Tuesday, Germany's DIHK Chambers of Commerce said it was raising its forecast for German export growth in 2018 to at least 6 percent from 4.5 percent seen in the autumn.
"Exports are developing dynamically, especially with our resurgent neighbours in Europe," the DIHK's foreign trade chief, Volker Treier, told Reuters.
(Writing by Paul Carrel; Editing by Catherine Evans)
