German gross domestic product (GDP) trod water in the final three months of 2005 compared with the previous quarter as falls in private and public spending offset a jump in stock building.
However, Deputy German Finance Minister Thomas Mirow said the German economic engine was revving up again at the start of 2006 despite the pause in expansion at the end of last year shown in Wednesday's data from the Federal Statistics Office.
"The government therefore still expects that the recovery will continue this year," Mr Mirow said in an editorial in the ministry's monthly report for February, reiterating a 2006 growth forecast of around 1.5 per cent.
"The more favourable growth situation will also lead to an improvement in the labour market," he added. The stagnation in fourth quarter GDP followed growth of 0.6 per cent in the third quarter. Year-on-year, GDP growth was 1 per cent, down from 1.4 per cent in the July-September period.
Analysts said there were some encouraging aspects to the figures, particularly the strength of construction sector activity which registered its second consecutive rise.
HVB Group economist Andreas Rees said in a research note that the figures were a mixture of "light and shade" despite the overall lack of growth.
"Investment in machinery and equipment was up only slightly. However, one should keep in mind that it is the sixth increase in the last seven quarters," he said.
Germany's net trade with the rest of the world also had a negative impact on GDP in the October-December period, the office said, with import growth more than twice as strong as the 0.5 per cent quarterly expansion posted by exports.
Stock building added 0.8 percentage points to fourth quarter GDP growth, the biggest contribution in two years. Gross investment added 0.1 point to growth.
By contrast, private consumption deducted 0.4 point, public sector spending 0.3 point and net trade 0.2 point. The Statistics Office also said that, thanks to better than expected tax revenues, Germany's public-sector budget deficit in 2005 was lower than first reported. It revised down the figure to 3.3 per cent of GDP, from a January estimate of 3.5 per cent.
A Finance Ministry spokesman told Reuters later today it expects the 2006 deficit to be unchanged at 3.3 per cent of GDP. If confirmed, the figure would mean Germany will breach the
European Union's deficit limit of 3 per cent of GDP for a fifth successive year.