German business confidence posted a surprise rise in August, a key survey by the Ifo economic institute showed yesterday as Europe’s biggest economy powers towards what many expect to be strong full-year growth.

“The German economy remains robust,” a statement quoted Ifo president Hans-Werner Sinn as saying as the institute’s climate index rose to 106.7 points from 106.2 points in July, its highest level since June 2007.

Analysts polled by Dow Jones Newswires had forecast on average a slight decline to 106 points following a record rise by the poll of 4.4 points in July.

The latest improvement thus fortified the clear increase in July, Ifo said.

Its survey was released a day after official data confirmed Europe’s biggest economy grew by 2.2 per cent in the second quarter from the previous three-month period, the biggest quarterly increase since east and west Germany were reunified in October 1990.Business sentiment was thus at its highest level since before the global financial system was slammed by a meltdown of the US market for high risk mortgages in mid-2007.

Ifo also said however, that business expectations for the next six months edged slightly lower to 105.2 points from 105.5 points a month earlier.

Analysts had expected a bigger drop to 104.9 points. The institute surveys some 7,000 German manufacturing, construction, wholesaling and retailing companies each month to establish the widely-followed index of business sentiment.

It found in the manufacturing sector that while the current climate was better than in July, the six-month outlook was “still very confident, though somewhat less so than in the previous month.”

Many economists and business leaders expect Germany’s strong rebound from a record post-war recession to taper off in the coming months, but the central bank has raised its full-year growth forecast to around three per cent.

The government is expected to raise its current official forecast of 1.4 per cent growth in October.