German shoppers are worried about more price rises

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."