The German economy slowed slightly as it entered 2007, growing only 0.5 percent during first quarter, according to data released Tuesday. However, the January’s value-added tax rise had less than expected impact on Europe’s biggest economy growth.

Economists had predicted that the figures released by the nation's statistic's office would show growth in Germany during the first three months of the year slowing to 0.3 percent compared to a revised 1 percent in the fourth quarter of 2006.

"Consumer spending slowed economic growth considerably, as a result of the value-added tax hike at the beginning of the year," the statistics office said releasing the latest data.

The latest quarterly data raises the prospects of Germany turning in a growth rate this year similar to last year’s 2.7 percent expansion rate, when the nation emerged from a prolonged economic stagnation. The German government is predicting a more cautious 2.3 percent growth rate this year. The European Commission last week raised its eurozone growth forecast for this year to 2.6 percent.

Analysts had expected German growth to cool down during the first quarter as a result of the government's decision to raise the nation's VAT by three percentage points to 19 percent on January 1.

However, the latest quarterly data adds to signs that the German economy has managed to withstand the VAT rise. Apart from what the statistics office described as "continued brisk investment" it said the first-quarter GDP data indicated there "were also positive impulses from net exports, albeit only compared with a year earlier."

Indeed, economists expect the nation's economy to pick up speed as the year progresses and have been revising up their 2007 forecasts.