The Ifo institute's index of German business sentiment rose unexpectedly to its top level in eight months in September.
The Munich-based think tank's closely watched business climate index, based on a survey of around 7,000 firms, rose to 96.0, the highest reading since January, from 94.6 in August.
But the report did not fully reflect an inconclusive election that may dent confidence in the future. Only one-fifth of responses had come after the September 18th election, and Ifo President Hans-Werner Sinn said these had shown a less favourable trend.
The failure of either of Germany's biggest parties to secure enough votes to govern with their preferred coalition partners has prompted analysts to warn that structural changes could be delayed, holding back economic growth.
David Brown, chief European economist at Bear Stearns International in London, said September's Ifo gain was probably a fluke and the index would see a correction in the October and November surveys.