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Last Updated: Thursday, 14 February 2008, 08:29 GMT
Price worries slow German growth
Shoppers in Berlin
German shoppers are worried about more price rises
Germany's economy slowed in the final quarter of 2007, as higher prices led to shoppers tightening their belts.

The economy grew by 0.3% from October to December, down from growth of 0.7% in the previous quarter, and further slowing is expected in early 2008.

Rising consumer prices, together with expectations of further inflation, hit household spending, analysts said.

Compared with the same period a year earlier, the German economy grew by 1.6% in the fourth quarter.

'Employment prospects'

Despite the slowdown, data from the national statistics office, Destatis, showed strong gains in equipment investment and analysts said that industry was still well placed.

"Consumption remained weak at the end of the year because inflation has sapped income gains and we expect a further slowdown in coming quarters," said Joerg Lueschow of WestLB.

"But above all the fact that manufacturers are sitting on a huge cushion of orders suggests there won't be a slump.

"In addition, incomes will get a boost from rising employment and higher wage deals. That's good for private consumption which can take on the role of growth motor this year."

Destatis confirmed that the German economy - the biggest in Europe - grew by 2.5% in 2007, after a 2.9% increase in 2006.

Country profile: Germany
08 Jan 08 |  Country profiles
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German confidence falls further
25 Sep 07 |  Business
Leading EU nations see slowdown
14 Aug 07 |  Business

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