FRANKFURT, Germany (AP) - Germany's economy grew more slowly in the third-quarter, the government reported Tuesday, while the closely watched ZEW index of economic sentiment fell again in November for its 10th consecutive month.
Gross domestic product in Europe's largest economy was up just 0.6 percent in the July-September period, according to the Federal Statistics Office. That was lower than 1.1 percent growth in the second quarter and below the 0.6 percent predicted by analysts polled by Dow Jones Newswires.
In the third quarter of 2005, GDP was up 2.3 percent.
UniCredit economist Andreas Rees said that even though economic activity lost ground, ''the upswing remains intact.''
He said fourth-quarter GDP was expected to rise 1 percent on the perception that consumers will spend more ahead of the Jan. 1 increase in value-added tax from 16 percent to 19 percent.
Meanwhile, the ZEW index dropped as fears of a global economic slowdown and more interest rate increases by the European Central Bank loomed large.
The index, conducted by the ZEW, or Center for European Economic Research, fell to minus 28.5 from minus 27.4 the month before, its lowest level since March 1993. Analysts surveyed by Dow Jones Newswires had expected the survey index to rise to minus 25.
Any reading below zero shows pessimism about the economic outlook.
UniCredit's Markets & Investment Banking economist Alexander Koch said the decline was ''no reason to panic.''
''In our view, the extremely low reading of ZEW growth expectations, which is the lowest for more than a decade, paints an overly pessimistic picture,'' he said in a research note. ''Although we don't challenge the clear signs of a forthcoming moderation in growth ... in 2007, the magnitude of the slowdown should remain limited. The momentum of the economic recovery has proved to be more robust than initially thought.''
Sentiment was supported by lower oil prices _ but not enough to overcome fears about the impact of a slowing world economy and expected interest rate increases by the ECB, ZEW president Wolfgang Franz said in a statement.
He reiterated that Germany's planned VAT increase will dampen a recovery in the economy in the first part of next year.
But he added that German consumers would start spending more toward the middle of next year and that recent corporate tax reform by the government would help lure new investment to Germany.
''The downward trend of expectations seems to have come to a halt. This indicates that consumer demand will stabilize in the second half of next year. Furthermore, the decisions on the corporate tax reform, which will improve the German economy's attractiveness, are sending out a positive signal,'' Franz said.
The ECB meets Dec. 7 and is expected to increase its key interest rate from 3.25 percent to 3.5 percent.