Germany has avoided recession despite the resurgent euro zone debt crisis, official data showed today.
This confirmed the resilience of Europe's top economy to the turmoil.
The German economy grew by 0.5% in the first quarter of the year, federal statistics office Destatis said, after contracting at the end of 2011, dodging a recession defined as two consecutive quarters of negative growth.
The data were much better than the market had expected as analysts had pencilled in growth of 0.1%.
Compared with the same time the previous year, the economy grew by 1.7%, Destatis said.
The growth was driven both by trade as well as by domestic demand, the statisticians noted.
Germany has shown remarkable resistance to the euro zone crisis despite some of its closest neighbours and trading partners suffering crippling recessions. Both exports and imports are at a record high, data earlier this month showed, as demand outside Europe for goods 'made in Germany' continues to grow strongly.
Meanwhile, unemployment is near its lowest level since reunification in 1990, in turn boosting domestic consumption and reducing Germany's reliance on trade.
Forward-looking indicators also suggest that Germany's future growth path will be firm, with the closely watched Ifo survey of business confidence rising for the past six consecutive months.
Germany suffered more than most from the international economic and financial crisis that worsened with the collapse of US investment bank Lehman Brothers - contracting nearly 5% in 2009 - but has since rebounded strongly.
After growing by 3.7% in 2010 and by 3% last year, Berlin has forecast a much smaller increase of 0.7% for this year, which is still respectable compared with the euro zone as a whole. Next year should see the growth rate more than double to 1.6%, according to economy ministry forecasts.
German investor confidence tumbles on euro crisis
German investor confidence fell sharply in May following five months of gains in a row, as analysts fretted about the euro zone debt crisis.
The ZEW institute's closely watched barometer of investor sentiment stood at 10.8 points in May, after 23.4 points in April. Analysts had expected a less steep decline in sentiment to 19.8 points.
"Against the backdrop of the sovereign debt crisis in the Eurozone, economic risks have risen during the previous weeks according to financial market experts," said ZEW president Wolfgang Franz.
For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months. Their assessment of the current situation was up by 3.4 points compared with last month, however, at 44.1 points.
"It may have contributed to this month's decline that the outcome of the elections in Greece and France has made it more doubtful that European governments will resolutely fight the sovereign debt crisis," said the ZEW.
A frequent criticism against the index is that it can be volatile and is therefore not particularly reliable.
Other business confidence indices, such as the purchasing managers' index or the all-important Ifo survey, which is based on as many as 7,000 responses in the real economy, are seen as more accurate indicators.