German business confidence remains upbeat German business optimism has brightened for a fourth consecutive month, widening the divergence between Europe's largest economy and crisis-hit countries in the continent's south. The Munich-based Ifo institute said its business climate index rose from 108.3 in January to 109.6 - the highest since July last year. The stronger-than-expected surge added to evidence that Germany's growth slowdown late last year was only temporary, with domestic demand becoming an increasingly powerful growth driver. The index, regarded as offering an advance guide to growth trends, has rebounded since last October on the back of improving expectations about the outlook for the next six months. But the February Ifo survey also showed businesses upgrading their assessment of current conditions, for the first time since last June. The rise in German business optimism will strengthen the case for the European Central Bank to eschew further cuts in its main interest rate from the current record low of 1 per cent. Some members of its 23-strong governing council fear monetary policy in Germany is worryingly loose, creating possible inflation risks. Ifo said optimism in German retailing had "brightened noticeably" this month, while the construction sector had also seen a strong rise in confidence. Those sectors" strength reflect steady falls in unemployment to the lowest level since German reunification in 1990 and the increasingly favourable financing conditions in Germany, which have led to sharp rises in house prices. "The German economy is currently supported by domestic demand," said Hans-Werner Sinn, Ifo's president. In contrast to much of southern Europe, German businesses have had easy access to credit - partly because the country's banks have preferred to lend at home rather than to overseas companies. This week, the Bundesbank reported residential property prices rose 5.5 per cent last year - a rapid pace for Germany, where prices had been more-or-less flat for the previous decade. Germany's economy contracted by 0.2 per cent in the final three months of last year. February's rise in the Ifo index added to evidence that the country will avoid a technical recession - defined as two consecutive quarters of contraction. German purchasing managers" indices released this week offered a gloomier picture. They showed private sector activity growing in February at a slower rate than in January. But the Bundesbank and private sector economists see German growth reaccelerating in coming months. Alexander Koch at UniCredit in Munich said the eurozone debt crisis still posed a significant threat - in spite of this week's deal on a second bail-out for Greece. Higher oil prices could also put a brake on growth. But with global economic and financial market indicators improving "a gradual build-up in growth dynamics will follow in the course of 2012."