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Big contraction in German economy

The German economy grew by 0.7% in 2012, indicating a sharp contraction to the European powerhouse’s economy compared to last year’s figure of 3% in 2011.

Many investors had been predicting that the nation’s GDP would grow by 0.8%. German imports and exports declined in November and industrial orders fell more than expected adding to the worries that the Euro-zone debt has finally struck the heart of the currency bloc with its full impact.

The Federal Statistics Office, who compiled the data said in a statement; “In the previous two years, GDP growth had been much larger but that was due to a catching-up process following the worldwide economic crisis of 2009.”
Last month Germany’s Central Bank the Bundesbank slashed its growth forecast for 2013 to 0.4%, and warned that the economy may have contracted in the final quarter of 2012, and could do so again at the start of 2013, sending Europe’s biggest economy into recession.

“The German economy might not be an island of happiness any longer but it remains at least an island of growth in a still recessionary Euro-zone sea,” said Carsten Brzeski, an economist at ING.

Most economists expect Germany to bounce back from the weak fourth quarter in the months ahead, but 2013 is still shaping up as another year of meagre growth. The government is due to publish an estimate for 2013 growth on Wednesday. It is expected that it would halve its forecast to 0.5% from 1%

It’s not all doom and gloom though. Germany’s private sector reportedly expanded for the first time in eight months and morale in the business sector continues to rise reaching its highest level in five months on optimism over the future. The statistics office also revealed that Germany’s public sector rose to a surplus for the first time since 2007.

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