Official figures show that German economic growth slowed in the first three months of 2007, largely due to a sharp rise in VAT.
German gross domestic product (GDP) grew by 0.5% from the previous three months, down from 1% in the final quarter of 2006, the federal statistics office Destatis said. But the slowdown was not as sharp as economists had feared. The annual rate of growth was 3.3% in the first quarter.
'Consumer spending put the brakes on economic growth, largely in connection with the VAT hike at the beginning of the year,' Destatis said.
From January 1, the German government raised VAT by three percentage points to 19%.
The figures show that the current economic upturn remains intact, with growth driven both by lively investment and robust exports.
