Business confidence in Germany continued to improve further in January, posting a gain for an eighth consecutive month.

The Ifo Institute's business climate index for the eurozone’s largest economy rose to 110.3 in January from 109.8 in December 2010. Economists had expected the index to rise slightly to 110.1 in January.

“The business climate has thus continued the positive development of the past year. The firms are just as satisfied with their current business as they were in December, and they have given more favourable assessments of their business prospects for the coming half year. The German economy has started the year with great vigour,” said, Hans-Werner Sinn, President, Ifo Institute for Economic Research.

Also, the expectations index, which measures business executives' expectations over the next six months, rose to 107.8 from 106.8 last month.

However, Ifo's current-conditions index slightly dropped to 112.8 from 112.9 in the previous on a seasonally adjusted basis.

The institute said the climate for manufacturers improved in January, having clouded over somewhat in the previous month. Manufacturers see much better export opportunities and plan to increase their staff.

The survey found the business climate for retailing and wholesaling cooling off in January, following a significant improvement in December.

“Both retailers and wholesalers no longer assess their current business situation quite as favourably as in the past month,” Sinn said.

In the construction sector, the contractors are more satisfied with their present business situation and also expect a clear improvement in business in the coming months.