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January 16, 2013

Euro Crisis Damps German Growth

Germany’s economy shrank at the end of 2012, an official report showed, as weaker global demand and recessions throughout Southern Europe triggered a slide in business investment.

The downturn should be short-lived, analysts said. Key export markets such as the U.S. and China are starting to pick up, while improved sentiment surrounding Europe’s three-year-old debt crisis is expected to spur a recovery in the euro zone this year.

Still, Tuesday’s report suggests Europe’s largest economy isn’t serving as a locomotive for the 17-member euro bloc, as many economists had hoped. Germany relied heavily on exports last year for growth. Consumer spending, which supports imports from other European countries, remains weak.

German GDP expanded 0.7% in 2012, after two straight years of growth at 3% rates or more, statistics office Destatis said Tuesday. Based on the full-year figures, GDP fell around 0.5% in the fourth quarter from the third, or 2% in annualized terms, according to J.P. Morgan Chase.”

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