BERLIN Jan 11 Germany, Europe's largest
economy, contracted in the fourth quarter of 2012 as factories
slashed production in response to weak European demand but
growth will pick up again this year, the country's Economy
Ministry said on Friday.
Germany is set to publish an estimate of gross domestic
product (GDP) for 2012 next Tuesday. Economists surveyed by
Reuters have forecast 0.8 percent growth. Fourth
quarter figures are expected in February.
"The tough European environment has dampened German economic
growth," the ministry said in its monthly report.
"According to indicators, one should expect a significant
decline in economic performance for the final quarter of the
year," it added.
It added that weaker demand for German exports, combined
with uncertainty caused by both the euro zone crisis and the
future direction of U.S. fiscal policy, had reduced firms'
willingness to make investments, causing growth to slow.
That tallies with recent data which has shown orders
tumbling, output rising very modestly, exports and imports
sliding and the manufacturing sector shrinking.
Most economists say Europe's economic powerhouse experienced
a slight contraction in the fourth quarter, though they see it
avoiding a recession - defined as two consecutive quarters of
contraction - and picking up in the first quarter of this year.
The ministry said the underlying strength of the German
economy as well as positive signs from the global economy
indicated the economy would "revive significantly" in the course
of 2013, especially given that it remains competitive and the
international environment has calmed somewhat.
"A slight improvement in sentiment indicators suggests that
the economy will start the new year on a positive note and will
quickly overcome this temporary period of weakness," the
Recent surveys have shown morale at German businesses
picking up and investor sentiment brightening, while order
levels are showing signs of stabilising.
Until last year, Germany had escaped the euro zone's
problems largely unscathed, growing by a record 4.2 percent in
2010 and by 3 percent in 2011, but the economy ministry said in
October it expected growth to slow to around 0.8 percent in
The ministry said a robust labour market was continuing to
support the domestic economy and added that exports,
traditionally a key driver of growth for Germany, were likely to
gradually regain momentum this year.