The German Ifo Business Climate index in August rose to 107.5, up from a July reading of 106.2 and slightly above the 107.0 estimated by analysts polled by Reuters, data released by the Ifo Institute for Economic Research showed, on Tuesday.

“Companies are more satisfied with their current business situation. Their optimism regarding future business developments – although slightly cautious – also grew. The German economy moved up a gear,” Kai Carstensen, director of the Ifo Center for Business Cycle Analysis and Surveys said, in a statement.

The business climate indicator for manufacturing in August rose to its highest value since April 2012 and wholesale business climate improved significantly, but the business climate index in retailing edged downward, the survey said.  

The uptick of the index, which rates the current German business climate and measures expectations for the next six months, is expected to continue into the next year, Gernot Nerb, an analyst at the Ifo Institute, told CNBC.

The sub-index for business expectations in August, which rates the expectations of businesses in Germany for the following six months, rose to 103.3 from 102.4 in the previous month, while the sub-index for current assessment, which rates current business conditions in Germany without considering future expectations, rose to 112 in August, from a 110.1 reading in July.

"This is a positive sign that companies are starting to invest more. We think this is more than just a blip and will continue into next year," Nerb told CNBC.