German Economy Shrinks

The healthiest economy in Europe is no longer so healthy

Germany, Europe's largest economy, contracted in the fourth quarter of 2012 as factories slashed production in response to weak European demand but growth will pick up again this year, the country's Economy Ministry said on Friday.

Germany is set to publish an estimate of gross domestic product (GDP) for 2012 next Tuesday. Economists surveyed by Reuters have forecast 0.8 percent growth. Fourth quarter figures are expected in February.

"The tough European environment has dampened German economic growth," the ministry said in its monthly report.

"According to indicators, one should expect a significant decline in economic performance for the final quarter of the year," it added.