The Ifo institute said its business climate index rose to 89.4 compared with a reading of 88.8 forecast by analysts in a Reuters poll. In March, the reading was revised slightly to 87.9.

"The third rise in a row and the second strong increase in a row. That looks like a trend reversal," said LBBW senior economist Jens-Oliver Niklasch.

"You have to remain cautious in difficult times, but at least there is now some evidence to suggest that we saw the bottom of the economy in winter," he added.

Overall morale was boosted by companies reporting that they were more satisfied with their current business situation, while future expectations also brightened significantly, according to the survey.

Both these indexes beat forecasts, with expectations rising to 89.9, versus a predicted 88.7, and assessment of the current situation climbing to 88.9, slightly above an expected 88.7.

"The economy is stabilizing, especially thanks to service providers," said Ifo president Clemens Fuest.

Earlier this week, the flash HCOB purchasing managers' index (PMI) also showed a boost in services activity, with the April reading rising well above forecast to its highest in 10 months.

The German government will nudge up its growth forecast for this year to 0.3%, from 0.2% previously, at a news conference later on Wednesday, a source told Reuters last week.

Germany is broadly expected to enter another technical recession in the first quarter of this year, after its economy shrank by 0.3% in the final quarter of last year.

Europe's biggest economy was the weakest among its large euro zone peers last year, as high energy costs, feeble global orders and record-high interest rates took their toll.