Germany’s economic recovery will broaden next year as Europe’s largest economy benefits from faster growth in consumer demand and business investment, Standard & Poor’s said.

Household spending will increase 2 percent in 2011, compared with 0.5 percent this year, S&P Chief European Economist Jean-Michel Six said in an e-mailed report in Paris today. Business-investment growth will accelerate to 10.5 percent from 10 percent in 2010, he said.

Germany’s economy fueled the euro region’s growth this year as companies stepped up hiring and output to meet export demand, encouraging consumer spending. While economic expansion may slow as waning government stimulus packages around the world hurt the nation’s exports, stronger domestic demand may still put its expansion on a firmer footing, S&P said.

“The economic upswing will continue, we believe, feeding on a broader and more balanced range of growth sources in the coming two years,” Six said in the report. “Domestic demand, corporate capital spending, and household consumption will likely widen the dimensions of the recovery, while export growth levels off.”

Exports and private consumption drove Germany’s 0.7 percent economic growth in the third quarter, data showed on Nov. 23. Six forecast net exports will make almost no contribution to growth over the next two years and the nation’s high dependence on overseas demand may be a source of potential weakness as world trade slows.

Government budget squeezes in Germany’s main trading partners and tighter monetary policy conditions in emerging markets, particularly China, may cause a exports to fall “more markedly than we currently anticipate,” he said.

German gross domestic product expansion will slow from 3.5 percent this year to 2.4 percent in 2011 and then 2.1 percent the year after, S&P said.

Bloomberg