A closely-watched survey of German business sentiment is up to its highest level in two and a half years, beating expectations and underscoring optimism that Europe's largest economy is picking up speed.

The Ifo Institute said Monday its business climate index for February rose to 111.3 points in February from 110.6 the month before — its highest level since July 2011.

Ifo says the rise was driven by greater optimism in the manufacturing and retailing sectors, while both the construction and wholesaling sectors saw slight dips.

Anna Zabrodzka, an economist at Moody's Analytics, says the results support "our view that the pace of economic growth should pick up at the beginning of this year."

Germany's economy grew 0.4 percent in the fourth quarter of last year.