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Last Updated: Tuesday, 14 February 2006, 15:08 GMT
Germany's economy treading water
German steelworker
The German economy has been sending out mixed signals
The German economy stagnated in the final quarter of 2005, casting doubt on the durability of its nascent economic recovery.

Economic output was flat in the three months to 31 December, official data showed, after positive growth in each of the previous three quarters.

On an annualised basis, output was 1% higher than in 2004's final quarter.

Recent economic indicators have been mixed, with unemployment rising but exports performing strongly.

The jobless total rose back above the five million mark in January, while retail sales fell in December.

On the other hand, Germany's trade surplus rose to a record level last year - and business confidence is at a five year high.

It would be wrong to talk about an end to the recovery
Rainer Guntermann, Dresdner Kleinwort Wasserstein

Europe's largest economy slowed towards the end of 2005 after seeing growth of 0.6%, 0.3% and 0.6% in the first three quarters of 2005.

"The economic growth of the first three quarters did not continue towards the end of 2005," Germany's Federal Statistics Office said in a statement.

'Taking a breather'

German analysts are divided over whether talk of sustained economic recovery last year may have been premature.

"Just a few weeks ago, the sky seemed to be the limit in Germany," said Andreas Rees, from HVB Group.

"However, in fact, the figure is far less upbeat."

Cafe in Bilbao
Spain's strong growth contrasts with Germany's spluttering performance

But Rainer Guntermann, from Dresdner Kleinwort Wasserstein, said he still expected the economy to grow between 1.5% and 2% this year.

"The interpretation will be that the economy has taken a breather," he said.

"It would be wrong to talk about an end to the recovery. The second half of 2005 was better than the first."

Eurozone concerns

Other leading economies such as France saw output slow towards the end of 2005 but policymakers are still upbeat about growth prospects across the 12-nation eurozone in 2006.

"That does not undermine our view, one shared by the European Central Bank, that recovery is emerging," Jean-Claude Juncker, Luxembourg's Prime Minister, said on Tuesday.

In one brighter piece of news for the eurozone, Spain reported improved economic growth of 0.9% in the final quarter.

One of Europe's strongest economies, Spain is forecasting full-year growth of 3.4%, its best performance since 2001.

German trade surplus hits record
08 Feb 06 |  Business
Caution over German jobless rise
31 Jan 06 |  Business
German firms grow in confidence
25 Jan 06 |  Business

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