German economy slips into reverse in last quarter

Germany's economy slipped into reverse in the last quarter of 2011, with gross domestic product falling 0.2%, according to adjusted figures.

The drop in Europe's largest economy, reported by the Federal Statistical Office, was slightly less than the 0.25% that had been expected.

The Statistical Office said the economy grew 3% overall in 2011, in line with preliminary figures released last month.

The government is predicting a return to 0.1% growth in the first quarter of 2012, and expects 0.7% growth overall for the year.

Carsten Brzeski, an economist with ING Global Research, said the fourth quarter slide was no cause for greater concern and the underlying factors supporting the German economy were still strong.

"The first economic contraction since the end of the recession turned out to be weaker than expected, confirming that the German economy only took a growth pause and is not approaching a new recession," he said in a research note. "The big unknown for the German economy remains the sovereign debt crisis."

The Economy Ministry in January cut the country's 2012 growth forecast from 1% to 0.7% - its second reduction in three months. As recently as October the prediction was 1.8%.

Still, Germany is expected to avoid a recession - defined as two consecutive quarters of negative growth - with 0.1% growth predicted for the first quarter of 2012.

The World Bank is forecasting that the eurozone economy as a whole will contract by 0.3% this year. It sees the United States growing by 2.2%, Japan by 1.9% and China by 8.4%.

Germany's 2011 growth of 3% followed a growth spurt of 3.7% in 2010 after a deep recession the previous year.

That contrasted with the performance of many of its partners in the eurozone, which have seen their economies barely grow or shrink amid debt troubles and tough austerity measures.

AP