BRUSSELS, Feb 22 (Reuters) - Belgian business confidence improved slightly to a 10-month high in February, showing the economy is stabilising after year-end contraction, but not really profiting from a strong pick-up in Germany.

The Belgian index, a bellwether for the euro zone often called the leading indicator, picked up as manufacturing chiefs gave an improved outlook for demand and said stock levels were low, although business leaders in construction and retail became more pessimistic.

The business confidence index rose to -11.0 in Feb. from -13.2 in January.

A Reuters poll of 10 economists had produced a median forecast of -12.1, with a range from -13.7 to -10.0.

The February improvement in Belgium reversed a surprise decrease in January. However, while the index was at its highest since April 2012, it is only really at the top of a relatively tight range of -11.0 to -13.5 since then.

The Belgian number comes hours after the closely watched German Ifo business climate index posted its strongest monthly rise since July 2010.

Belgium's economy, the euro zone's sixth biggest and one of its most open, exports a large number of semi-finished goods to the region's most powerful economy, Germany, where the economic situation has been better than in the rest of Europe.

However, despite relative German resilience, Belgium failed to register a single quarter of growth in 2012, its economy contracting by 0.2 percent over the year.

Steven Vanneste, an economist at BNP Paribas, said the business sentiment index showed that Belgium's economy had improved little from the fourth quarter, when it shrank by 0.1 percent.

'We're still waiting for better figures to show that Belgium has returned to growth,' he said.

'The improvement will come, but the question is to what extent. It should show an improvement before Germany. Now it is totally dependent on German demand. There is also a question of competitiveness.'

Belgium's competitiveness has come under scrutiny by both the central bank and the European Commission, both of which released reports on Friday.

Belgian central bank governor Luc Coene said that Belgium had slipped even further behind Germany in terms of labour costs, particularly due to high tax and social contributions.

(Reporting By Ben Deighton and Philip Blenkinsop; editing by Ron Askew) Keywords: BELGIUM ECONOMY/LEADING

(ben.deighton@thomsonreuters.com)(+32 2287 6811)(Reuters Messaging: rm://ben.deighton.thomsonreuters.com@reuters.net)

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