"The escalation of the situation in east Ukraine, the ongoing tensions between the West and Russia and events in Greece are not leaving much of an impression on German consumers, who are increasingly optimistic," market research company GfK said in a statement.

"The drop in energy prices is boosting the purchasing power of private households and opening up room for further spending. As a result, income expectations and the propensity to buy are increasing as well," GfK said.

Looking ahead to next month, GfK's headline household confidence index was forecast to rise to 9.7 points in March from 9.3 points in February.

"That is the highest level since October 2001. The consumer climate in Germany remains in a clear uptrend," the statement said.

Consumer spending would contribute substantially to overall economic growth this year, the institute predicted.

GfK said it expected private consumption to rise by 1.5 percent in the whole of 2015 "and that is is a strong a rise as in overall gross domestic product (GDP)."

Sentiment in Europe's top economy is on the rise, as a weaker euro and falling oil prices boost the country's exporters.

Earlier this week, the widely-watched Ifo business climate index rose for the fourth time in a row to its highest level in seven months.