• German economy grew by 3.6% last year, fastest since 1990 • Rise to 5.7 points predicted in Gfk consumer confidence index

This article is more than 9 years old

This article is more than 9 years old

What a difference 500 miles and a healthy manufacturing sector makes: while Britain's economy contracted yet again today, German consumer confidence shot to its highest level in three years.

Couple that with stunning profits from Siemens and there can be little doubt that Germany's economy is not only putting Britain's to shame but also driving the eurozone's fragile economic recovery.

New figures show that German households are happy spending again following the worldwide economic downturn. The forward-looking GfK consumer sentiment index predicted a rise to 5.7 points for February, compared to 5.5 points for this month. Gfk had previously forecast a dip to 5.4 points, which would have been the first decline in six months.

In the industrial sector, Siemens, Europe's biggest engineering conglomerate, beat profit forecasts due to robust demand in fast-growing emerging economies and said signs for future sales were strong.

Like many German firms, Siemens' growth is heavily dependant on exports of manufactured goods to China, Brazil, India and Russia, where the firm has invested aggressively in infrastructure.

China, where Siemens generated nearly 8% of group revenue last year, is the world's number one buyer of German engineering products. Until 2009, the US was the top exporter of such goods to China.

Latest data showed German manufacturing orders grew at their fastest rate in 10 months in November, quicker than economists expected mainly due to strong demand from outside the eurozone for durable goods.

Siemens said growth was driven by its bread-and-butter industry sector, which makes machine tools that large companies use to equip factories, automation gear to help industrial plants run smoothly and LED lightbulbs that cut luxury cars' energy bills.

Businesses whose products take longer than four months to make, or long-cycle ones such as railway locomotives and power plants, also played catch-up in matching the short-cycle recovery in lightbulbs and automation drives.

"Orders and revenue grew in all regions, particularly in emerging markets," Siemens Chief Executive Peter Löscher said today, referring to the first quarter to end-December.

This month's figures showed the German economy rebounded strongly in 2010, growing by 3.6%, its fastest pace since reunification in 1990.

Carsten Brzeski, an analyst with ING, today said the Germany economy seemed buoyant against the odds. "German consumers took last year's verve into the new year. Even the first wave of German austerity measures could not stop optimism. With the start of the new year, some tax benefits were cut or halted, reducing disposable incomes."

There have also been cuts in parental aid and social security contributions have been increased. Brzeski added: "with increasing wages, dropping unemployment and pent-up demand, private consumption should become an important growth driver this year."