Germany introduced a higher VAT on cars in 2007

Household expenditure grew by 1.2% last year to around 1.375 trillion euros (�1.05 trillion) from 2.3% in 2006, the Federal Statistics Office said.

One the main reasons for the drop was the introduction of a higher level of VAT on cars at the start of the year.

But exports, not consumer spending, remain the main driver of the economy.

Recent figures showed that exports in January climbed by 3.8%, in contrast to a 1.2% fall in December, widening the trade surplus to 16.1bn euros (�12.3bn; $24.7bn).

The figures suggest German trade remains buoyant even though the stronger euro makes exports outside the eurozone relatively more expensive.

The latest figures show the amount of privately owned cars registered in 2007 dropped by 27% on 2006.

But the figures were influenced by the increase in VAT at the start of the 2007, and by increased car purchases in late 2006 ahead of that rise.