German economic growth accelerated to its quickest pace in three years in the first quarter as surging exports offset a drop in domestic demand.
Gross domestic product expanded by a stronger-than-expected 0.4 per cent from the previous quarter, the biggest gain since 0.9 per cent in the first three months of 2001, the German Federal Statistics Office said today.
"Everything suggests the recovery will continue over the remainder of the year, gaining a little momentum on the way," said Mr Ralph Solveen, an economist at Commerzbank in Frankfurt.
Together with figures from Italy and France, the German data suggested an estimate of first-quarter euro zone growth due tomorrow could be as high as 0.6 per cent, some economists said.
The positive surprise comes as the German government grapples with a gaping budget deficit caused by slow growth and shrinking tax revenues.
Europe's biggest economy has relied on demand for its exports, which account for about a third of the economy, to power a recovery after three years of stagnation.
At the same time, rising unemployment and uncertainty about government reforms are hurting confidence and crimping consumer spending, some 60 per cent of GDP.