Germany's economy expanded by a stronger-than-expected 0.6 per cent in the third quarter amid a surge in exports and strengthening corporate investment, preliminary data showed today.
But weak household spending caused an unexpected decline in a separate gauge of investor confidence published by the Mannheim-based ZEW institute, underscoring Germany's continued reliance on exports to power economic growth.
The ZEW report took some of the shine off of the GDP data, which showed German companies - which have undergone radical restructuring in recent years - were driving the recovery in Europe's largest economy.
"This company-driven recovery will continue in the fourth quarter. All the leading indicators point to it," said Andreas Rees, an economist at HVB Group in Munich.
"However, we remain sceptical about 2006 as the German economy remains strongly dependent on the drip feed of the global economy," he added.
HVB sees growth of 1 per cent next year. Germany's gross domestic product increased by 0.6 per cent quarter-on-quarter and by 1.3 per cent compared with the previous year, not adjusted for the number of working days, the Federal Statistics Office said.
The ZEW said uncertainty about the next government's economic policies and a proposal to increase VAT by three points in 2007 had further unsettled consumers.