(L to R) German Finance Minister Wolfgang Schaeuble talks with Danish minister Economy and Interior Margrethe Vestager prior to an Economic and Financial Affairs meeting on Feb 12, 2013 at the EU Headquarters in Brussels. – AFP Photo

FRANKFURT: The German economy, Europe’s biggest, shrank in the last quarter of 2012, as the eurozone crisis hit exports, data showed on Thursday, but analysts said activity would bounce back quickly.

The national statistics office Destatis calculated that gross domestic product (GDP) contracted by 0.6 per cent in price, calendar and seasonally adjusted terms in the period from October to December.

Analysts and economists had been pencilling in a drop of 0.5 per cent after Destatis said in January that the economy had contracted by “around half a percentage point” at the end of last year.

Growth has indeed been slowing all year as the eurozone debt crisis puts the brake on exports.

GDP grew by 0.5 per cent in the first quarter of 2012 and then by 0.3 per cent in the second quarter and 0.2 per cent in the third quarter.

With the contraction of 0.6 per cent in the fourth quarter, the economy expanded by just 0.7 per cent across the whole of 2012, compared with three per cent in 2011, Destatis said in a statement.

The statisticians noted, however, that due to the timing of the Christmas holidays, there were three fewer working days in 2012 than in 2011.

Adjusted for that effect, the German economy grew by 0.9 per cent overall last year, they calculated.

The fourth-quarter data “offer mixed signals,” Destatis said. “While consumer and state spending increased slightly, investment in construction was down and investment in equipment fell even more sharply,” it said.

“The main reason behind the contraction was foreign trade, which was relatively weak in the final quarter of 2012. Exports of goods declined more sharply than goods imports,” Destatis explained.

In France, the economy shrank by 0.3 per cent in the forth quarter and was weaker than expected, official data showed. Growth for the whole year in France was zero.

Economists are confident, however, that the dip in growth in Germany will be only short-lived and that the German economy will start expanding again in the first quarter of this year.

ING Belgium economist Carsten Brzeski said that “with increased uncertainty stemming from the euro crisis and the global economic cooling in the second half of the year, the German economy has finally lost its invincibility.

“Looking ahead, however, there is increasing evidence that the economy should pick up speed again very quickly,” Brzeski said.

Confidence indicators have improved over the last three months and the new optimism is not only wishful thinking, as evidenced by rising industrial orders, he said.

“All in all, even if today’s numbers are disappointing, they are no reason to start singing the blues on the German economy. The contraction should be a temporary gaffe rather than a new worrying reality,” he said.

Commerzbank chief economist Joerg Kraemer agreed.

“Previous economic cycles suggest that the recent rise in early indicators will feed through into the hard data fairly quickly,” Kraemer said.

“In the first quarter of 2013, the German economy will grow noticeably again. For 2013 as a whole, we’re projecting an increase of one per cent,” he said.

Newedge Strategy analyst Annalisa Piazza cautioned that the weaker-than-expected data in both France and Germany spelled bad news for the eurozone as a whole.

“This is the weakest quarterly reading since the first quarter of 2009,” Piazza said. “With both France and Germany GDP down more than expected, we now see risks for eurozone GDP to have contracted by 0.5 per cent, confirming the picture of another year of recession,” she concluded.