The news will cheer Chancellor Schroeder

Ifo's West German business climate index rose to 88.9 in February from 87.4 in January, an especially impressive jump in view of downbeat market expectations.

Although much other recent economic data has been decidedly grim, Ifo president Hans-Werner Sinn said the latest index figure was a genuine source of hope.

"For Germany overall, the signs are pointing to a change for the better," Mr Sinn said.

This is the second month in a row that the index has risen.

Boom or bust?

Ifo usually demands three successive months' movement in one direction before it identifies a trend.

Nonetheless, it seems to have become cheerful about Germany's economic prospects.

Gernot Nerb, the Ifo economist in charge of the index, said he saw no signs of a recession in Germany in the first three months of the year - and indeed saw a slight upwards impetus, thanks to domestic demand.

This optimism is not shared by everyone.

"You can't really refer to an upturn," said Lothar Hessler of HSBC Trinkaus & Burkhardt.

"We still expect Germany to fall into a slight recession in the first quarter."

Light at the end of the tunnel?

The Ifo figure comes after a period of exceptional gloom for the German economy.

Since Chancellor Gerhard Schroeder was re-elected last September, there has been a string of unfavourable economic news, especially in relation to still-chronic unemployment.

Over the past few days, reports from a number of the country's biggest banks have also indicated that the country could be on the brink of a full-blown financial crisis.

Germany's stock market, one of the worst performers in the developed world in recent months, is languishing at six-year lows.