German inflation at 30-month low

An imminent VAT hike is expected to slow spending

Falling oil prices helped inflation in Germany to fall to 1% in September - a two-and-a-half year low - figures show.

The annual rate was half a percentage point below August's figure, a sharper fall than had been predicted.

Higher eurozone interest rates as well as continued lower oil prices should keep price rises moderate in October, analysts say.

But experts expect inflation to pick up again next year as VAT is due to rise from 16% to 19% on 1 January.

Bullish outlook

Germany - Europe's largest economy - is emerging from several years of sluggish growth, which had put a brake on other eurozone economies.

The recovery is being partly driven by an increase in consumer spending - particularly on the back of the recent World Cup football tournament, which was staged in Germany - as well as strong exports of German goods abroad.

Earlier this month, Germany's economy minister Michael Glos gave a bullish forecast, predicting growth of between 2.0% and 2.5% in 2006 - ahead of the government's official forecast of 1.6%.

Germany's jobless count fell by 134,000 to 4.24 million - or 10.6% of the population - in September, according to official figures.