Gross domestic product expanded by 0.7 percent in the third quarter of 2009, according to the Federal Statistics Office (Desatis). It also revised an initial estimate for the second quarter slightly higher, to growth of 0.4 percent from 0.3 percent previously.

“The German economy has emerged from the deep recession earlier and faster than many had thought,” ING senior economist Carsten Brzeski said.

Analysts polled by Dow Jones Newswires had nonetheless expected third quarter growth of 0.8 percent for Europe’s biggest economy.

But the data is vital for Europe because it shows the biggest economy in the region is now pulling firmly away from the deepest recession since World War II.

On a 12-month basis, activity contracted by 4.8 percent when corrected for calendar effects, in line with forecasts and an improvement from the revised decrease of 5.8 percent in the second quarter.

Germany’s export-oriented economy was slammed by the global downturn, but is now benefiting from fresh demand for its machine tools, automobiles and chemical products. Destatis confirmed that growth was being driven by exports, corporate investment and construction, while private consumption had waned.

Economy Minister Karl-Theodore zu Guttenberg forecast in October that the economy would grow by 1.2 percent in 2010, a much improved outlook from April. Germany has recovered quicker than many of its neighbours, spurred on by huge injections of cash – some €80 billion ($119 billion) – from the government.

“Recent monthly data indicate that industrial production and a turning inventory cycle were the main drivers of growth,” Brzeski noted.

The International Monetary Fund hiked its forecast for Germany last month, predicting 2010 output of 0.3 percent.

The country still faces the prospect of rising unemployment however, despite subsidised shorter working hours that have limited the damage.

Officials now expect the number of jobless to average 4.1 million people next year, many fewer than feared at the height of the economic crisis.