The increase in Germany's VAT rate of three percentage points next month is bringing a year-end surge in new car registrations as consumers bring forward purchases to avoid the higher rate.

In November, German car sales were 18% higher than the same month last year at 326,000 units according to data released by the German auto trade association, the VDA.

Strong November sales have led the VDA adjust its forecast for the full year upwards to just over 3.4m new cars registered compared with 3.34m in 2005.

The VDA estimates that the VAT increase next year will add 700 euros on average to each new car purchased.

However, the VDA also estimates that car sales will be stable next year, confounding earlier predictions that next year would see a 'payback' following this year's pull-forward of sales. Analysts say that the German economy is performing better than many had expected and that momentum is expected to underpin demand in 2007.