German business confidence unexpectedly rose in November to its highest level since the middle of last year, offering more evidence that the biggest euro area economy continues to remain unscathed by events such as the Volkswagen pollution cheating scandal and the Paris terrorist attacks.

The business confidence index rose to 109 from 108.2 in October, marking its best reading since June 2014's 109.4, the results of the monthly survey by the Munich-based Ifo Institute showed Tuesday. Economists had expected the index to hold steady after easing in the previous month.

The German economy remains unaffected by growing uncertainty worldwide, Ifo Institute President Hans-Werner Sinn said.

The current situation index of the survey climbed to 113.4 from 112.7. That was in contrast to economists' expectations for a third straight monthly decline to 112.4.

Meanwhile, expectations improved for a third consecutive month to the strongest level since May last year. The index rose to 104.7 from revised 103.9, well above economists' consensus of 104.

"The positive Ifo reading is a bit of a conundrum as it is not entirely matched by positive hard data," ING Bank economist Carsten Brzeski said.

Industrial production unexpectedly decreased for a second straight month in September, signaling that the slowdown in emerging markets, especially China, have began to hurt demand. Factory orders declined for a third straight month, a trend last seen in 2011.

The latest set of third quarter growth figures released by Destatis earlier on Thursday confirmed that economic expansion slowed as estimated on weak foreign trade and investment. Gross domestic product advanced 0.3 percent from the previous three months, when the economy expanded 0.4 percent.

"Unusually for Germany, consumers are driving growth," Capital Economics economist Jennifer McKeown noted.

McKeown also pointed out that about 80 percent of responses of the Ifo survey, which covers 7,000 firms, were taken before November 13. Hence, most of any impact from the Paris attacks has yet to come, she added.

"The continued health of the German economy might raise questions about the need for more monetary policy support," McKeown said. Given the weaker inflationary pressure across Eurozone, including Germany, the economist expects the European Central Bank to cut its deposit rate and announce extra asset purchases next month.

On December 3, the ECB, headed by Mario Draghi, is widely expected to raise the size of its monthly asset purchases to EUR 80 billion from EUR 60 billion and also extend the EUR 1.1 trillion programme beyond its September 2016 deadline.

"While stronger-than-expected confidence indicators could motivate some ECB members...argue against new ECB action, Draghi's determination at the October meeting combined with continued underlying economic weaknesses and the absence of any inflationary pressure should be decisive in launching QE2," ING Bank's Brzeski said.

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