However, analysts warned the region’s debilitating sovereign debt crisis will likely put an end to the growth party in the months to come.
Gross domestic product (GDP) expanded by 0.5 percent on a quarterly basis in the period from July to September, fuelled by strong domestic demand and healthy consumer spending in particular, the federal statistics office Destatis said in a statement.
That marks something of a return to form for Europe’s biggest economy, after growth had slowed unexpectedly to 0.3 percent in the second quarter from a buoyant 1.3 percent in the first quarter.
“Positive impulses came primarily from domestic demand, with rising consumer spending in particular contributing to growth,” the statisticians at Destatis explained.
“In addition, investment in equipment also increased, while construction investment declined somewhat after a strong start to the year,” they said.
Foreign trade remained robust, with both exports and imports growing by around the same amount.
On a 12-month basis, however, German growth is slowing, with GDP expanding by 2.6 percent in the July-September period down from 3.0 percent in the preceding three months.
Destatis will publish a detailed breakdown of the growth figures on November 24.
But economists believe the economy will slow or even contract slightly in the fourth quarter as the eurozone debt crisis and the turbulence on the financial markets take their toll.
“The months July and August were simply too strong to have disappointing September numbers spoil the growth party,” ING Belgium economist Carsten Brzeski.
“Of course, third-quarter numbers come after an exceptionally weak second quarter, in which the shutdown of eight nuclear power plants had probably shaved off some 0.3 percentage points from the quarterly growth rate.”
The third-quarter figures put Germany on course for annual growth of 3.0 percent for the whole year, Brzeski said.
Nevertheless, sentiment indicators pointed to a “significant growth slowdown or even a contraction of the economy towards the end of the year” as a result of the debt crisis, the analyst cautioned.
For a long while, Germany had even benefitted from a weaker euro, very accommodative monetary policy and low funding costs, the expert suggested.
But with the crisis now pulling France and Italy into its maelstrom, the German economy would no longer be able to remain immune.
“Today’s numbers are as good as it gets for the German economy, at least for a short while,” Brzeski said. Berenberg Bank senior economist Christian Schulz agreed.
“This is likely to be the last quarter of significant growth for a while as the debt crisis is leading the economy to slip into a mild recession in the winter,” he said.
Nevertheless, any recession would only be confidence driven and “as soon as the crisis is back under control, confidence can return quickly and lead to a V-shaped return from mid next year,” Schulz said.
Many companies still had full order books, ensuring that production would not fall off a cliff immediately.
In addition, the export nation Germany “can benefit from the fact that the rest of the world does not seem to be dragged into the eurozone’s homemade recession so far,” the analyst said.
Simon Junker, economist at the DIW think-tank, similarly predicted a halt, albeit temporary, in German growth in the fourth quarter and Peter Kaidusch at Natixis said he was pencilling in slightly negative growth of around 0.2 percent for the period from October to December.
“Nevertheless, 2011 should come up with a growth of 3.0 percent, followed by 1.4 percent in 2012 and 2.0 percent in 2013,” Kaidusch said.