Germany's recovery continued in the last quarter of 2010, with exports offsetting weaker construction in cold winter weather and a run-down of inventories, putting Europe's bulwark economy on a firm footing going into 2011.

Detailed figures from the Federal Statistics Office confirmed gross domestic product (GDP) grew by 0.4 per cent in the fourth quarter, its seventh quarterly expansion in a row, but slowing from the first three quarters of the year.

Germany has staged a faster-than-expected recovery and outpaced its European peers since emerging from its deepest post-war recession in 2009. Year-on-year, the economy grew 4.0 per cent compared to the last three months of 2009.

Trade added 0.7 percentage points to GDP in Europe's largest economy, said the statistics office, which gave a breakdown of quarterly growth data that it first reported on February 15th.

Construction subtracted 0.4 percentage points from GDP, the same amount as a run-down in inventories.

"As expected, construction industry considerably slowed growth at the end of 2010. But that should be compensated in the first quarter," said Ulrike Kastens at Sal Oppenheim. "Strong orders and positive sentiment indicators suggest growth of between 0.8 and 1.0 per cent in the first quarter."

Forward-looking indicators have climbed to multi-year highs. German business morale this month scaled yet another record high, defying spending cuts and slower growth abroad, the Ifo think tank said on Monday.

Purchasing managers' surveys also signalled record growth in manufacturing is powering a strong expansion of the private sector.

Reuters