German consumers are upbeat

The economy grew 0.6% on a quarterly basis in the three months to October, down from 1.1% in the previous period - itself the strongest growth since 2000.

Despite the slowdown, output is still 2.3% higher than a year ago with both exports and domestic demand improving.

Further data showed firms are increasingly upbeat about the future.

'Better mood'

Companies questioned in an Ifo survey on business sentiment reported greater optimism about both current trading conditions and future prospects.

Analysts said the figures pointed to the likelihood of a strong final quarter for the economy, with one forecasting full-year growth of 2.5%.

"Despite worries about the onset of slower growth in the US and eurozone next year, business optimism about the future is still riding high," said David Brown, an economist with Bear Sterns.

"The sharp fall in oil prices since the summer's peak is definitely helping to support a better mood."

The third quarter slowdown could be partly explained by the boost Germany got in the previous period from staging the World Cup, with the bulk of the matches being played in June.

The planned introduction of higher VAT rates next year is continuing to give the economy a lift with shoppers bringing forward major purchases.