German investor confidence rose more than expected in December, a closely watched survey showed on Tuesday, as hopes grow that surging energy prices are coming down and record-high inflation is nearing its zenith.

The ZEW institute's economic expectations index jumped by 13.4 points to -23.3 points, the third consecutive increase after months of decline.

Analysts surveyed by Factset had forecast a smaller boost in morale, predicting a reading of -29 points.

"The vast majority of financial market experts expect the inflation rate to decline in the coming months," ZEW president Achim Wambach said in a statement. "Together with the temporary stabilisation on the energy markets, this leads to a significant improvement in the economic outlook."

The vast majority of financial market experts expect the inflation rate to decline in the coming months- ZEW president Achim Wambach

Germany's inflation rate eased to 10 per cent in November, after hitting a record-high of 10.4 per cent the month before. The surprise drop came on the back of slightly lower energy prices, although they remain far higher than in previous years as a result of Russia's war in Ukraine.

The German government has unveiled a €200 billion support package to mitigate the impact of the energy crisis, including a cap on gas prices for businesses and households.

The government nevertheless expects Europe's biggest economy to contract by 0.4 per cent in 2023.