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Weak European demand hits German GDP

Weak European demand hits German GDP
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Germany’s economy shrank at the end of last year as export demand from the rest of Europe weakened.

Factories in the region’s largest economy slashed production in the final three months of 2012 and were less willing to invest.

But the German Economy Ministry said growth will pick up again this year.

Germany will publish an estimate of gross domestic product for all of last year next Tuesday.

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 ministry said.

Recent surveys have shown morale at German businesses picking up and investor sentiment brightening, while order levels are showing signs of stabilising.