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February 14 2013, 7:43PM

The German economy, Europe's biggest, shrank in the last quarter of 2012, but analysts say activity will 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 3.0 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 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.

By Simon Morgan