UPDATE 1-German economy shrinks most since 2009 financial crisis

Thu Feb 14, 2013 2:38am EST

Related Topics

By Annika Breidthardt

BERLIN Feb 14 (Reuters) - Germany's economy shrank in the fourth quarter more than at any time since the height of the 2009 financial crisis and may have underperformed the wider euro zone for the first time since then, preliminary data showed on Thursday.

Economists, however, said Europe's largest economy, which usually serves as a growth engine for the currency bloc, had turned a corner at the start of 2013 and would not fall into recession, defined as two consecutive quarters of contraction.

"That was a bad fourth quarter. It was down to companies investing less due to uncertainty linked to the debt crisis. It was also, however, due to a weak global economy which put the brakes on German exports," said Joerg Kraemer at Commerzbank.

"But both these negative factors have fallen into the background... All the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

Germany's economy shrank by 0.6 percent in the final quarter of 2012 on a seasonally-adjusted basis, a tick worse than a Reuters forecast for a 0.5 percent contraction and the lowest since shrinking by 4.1 percent at the start of 2009.

The Statistics Office said weaker foreign trade - exports fell more than imports of goods - was to blame for the decline in the final quarter.

Private and public consumption both rose slightly but investment in building and equipment fell significantly compared to the third quarter. Final GDP data are due on Feb 22.

Gross domestic product in the 17-member euro zone as a whole is forecast to shrink by 0.4 percent, according to a Reuters poll of 61 economists. It is due to be published at 1000 GMT.

The French economy, the euro zone's second largest, shrank by 0.3 percent in the fourth quarter.

"When it goes well in the euro zone, Germany usually does better than France. When it goes somewhat worse in the euro zone, the French economy does better than the German. Germany is more cyclical in that sense," said Christian Schulz of Berenberg Bank.

Germany's economy held up strongly during the first years of the euro zone debt crisis and economists say its robust performance has helped struggling periphery states. But it, too, slowed through last year.

Germany's ability to recover strongly is seen as of crucial importance to Europe's hopes of emerging from four years of debt crisis and recession. Most economists expect Germany's economy to grow, albeit weakly, in the first quarter of the year.

FILED UNDER: