German business confidence defied predictions to climb to a new two-year high in October, the Ifo economic institute said Tuesday.

The Munich institute's headline business confidence index hit 110.5 points in October, up one point from the September reading of 109.5 and the highest level since April 2014.

Business people's mood beat the forecasts of analysts surveyed by Factset, who had predicted the indicator would remain at the same level as the previous month.