German business sentiment rose unexpectedly for the fifth month in a row in March, signalling that Europe's largest economy is proving more resilient than others to the euro zone debt crisis.

The Munich-based Ifo think tank said today its business climate index, based on a monthly survey of some 7,000 companies, rose to 109.8 in March from a revised 109.7 in February.

The closely-watched Ifo index bucked expectations for a steady reading and rose to its highest level since July 2011, just days after data showed the first contraction in German manufacturing this year.

"German Ifo: is the sky the limit?" said Carsten Brzeski, economist at ING in Brussels. "The strong labour market, filled order books and low inventories still bode well for growth in the coming months, albeit at a low level."

The euro rose briefly against the dollar and German Bund futures pared gains on the data.

The German economy has gone from strength to strength since emerging from the 2009 financial crisis, interrupted only by a slight contraction in the last quarter of 2011 when the debt crisis spread further through the euro zone.

Economists say that was a blip, prompting some think tanks to raise their growth forecasts. IWH Halle institute expects the German economy to grow by 1.3 per cent this year, almost twice the government's forecasts for a 0.7 per cent expansion.

But the rise in business sentiment was not as broad-based as in recent Ifo surveys - the mood worsened slightly in all branches except retailing. Manufacturing, construction and wholesaling were more downbeat, though manufacturers told Ifo they expected "positive impulses from export business".

Reuters