Germany joins the Eurozone’s economic rout

Tim Wallace
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THE GERMAN economy contracted in the final quarter of 2012, official figures estimated yesterday, dealing a body blow to the Eurozone as its biggest and strongest member contributed to the recession afflicting the currency area.

And inflation in the leading nation edged up again in December, further reducing the chances of the European Central Bank cutting interest rates.

The fall in German output comes despite leaders including the European Commission president Jose Manuel Barroso and the International Monetary Fund’s head Christine Lagarde claiming the Eurozone is on the road to recovery.

Provisional estimates suggest German GDP fell 0.5 per cent on the quarter, ending a nine-month run of expansion and leaving the economy 0.7 per cent larger than it was at the start of the year – well below the three per cent growth seen in 2011.

“Investment was the key culprit for the slowdown,” noted Berenberg economist Christian Schulz.

“As the Euro confidence crisis weighed on sentiment, especially investment into equipment suffered (minus 4.4 per cent).”

Export growth also slowed, falling from 7.8 per cent to 4.1 per cent.

But trade still contributed 1.1 per cent to growth as exports grew more quickly than imports.

Meanwhile inflation rose from 1.9 per cent to 2.1 per cent in December.