German economy slows as euro crisis bites

The eurozone debt crisis is taking its toll on Germany, Europe's largest economy, which ground to a near halt in the third quarter of the year, official figures showed on Thursday. Germany's economy grew a mere 0.2 percent in the July to September period compared to the previous quarter, according to provisional data published by federal statistics office Destatis. The figures were in line with expectations. Analysts surveyed by Dow Jones Newswires had expected Germany to register growth of 0.2 percent. Meanwhile, figures from France, Europe's second-biggest economy, showed that its economy shrank by 0.1 percent in the second quarter but rebounded to register growth of 0.2 percent in the third quarter. Destatis offered no detailed breakdown of the German figures but recent data have suggested that the economy, until now largely immune from the crisis, is increasingly feeling the pinch. The statistics office did however say that the positive drivers of the economy "came from abroad" with exports outpacing imports. Domestically, private and public consumption appeared to have held up, as did construction, but investments were down. Unlike most of its recession-wracked partners in the 17-nation eurozone, Germany has until now escaped the worst effects of the three-year crisis that has threatened to tear the bloc apart. It registered relatively healthy growth of 0.5 percent in the first quarter of the year, dipping to 0.3 percent in the second. But analysts have warned for some time that demand for Germany's all-important exports -- most of which go to fellow European countries -- must eventually dry up as the crisis bites. Economists expressed relief that the figures did not show Germany sliding into reverse, but warned that clouds were darkening on the horizon. Constantin Wirschke from Natixis bank said the third quarter figures were "as expected." For the fourth quarter, however, he acknowledged: "We are not as optimistic." "In our view, Germany's economy faces an uphill battle in Q4 trying to attain positive growth," said the analyst. So-called leading indicators of the economy, which aim to predict future performance, have pointed to a continued slowdown in the months ahead. A survey of investor confidence earlier this week dropped unexpectedly, prompting some economists to forecast a recession in Germany towards the end of this year and the start of 2013. And business sentiment is also at a two-and-a-half year low although consumer confidence appears to be holding up due to relatively low unemployment. "Hard" data showing how the economy is actually doing have been scarcely more encouraging. Figures earlier this month showed that Germany's trade surplus had contracted, with exports down 2.5 percent in September compared to the previous month. Industrial output in September also tumbled by 1.8 percent -- much worse than expected -- and orders also slumped, suggesting the picture is not about to brighten any time soon. While stressing that the German economy appears "more resilient than expected," Carsten Brzeski from ING bank said: "the near term outlook ... looks anything but rosy." Berlin expects the economy to grow by 0.8 percent overall this year but drastically cut its forecast for 2013, seeing only a one-percent gain in output. But the country's central bank has warned that the economy would slow sharply towards the end of the year and could even go into reverse. Destatis said it would release a detailed breakdown of third-quarter GDP on November 23. Growth figures for the whole of the eurozone were expected at 1000 GMT on Thursday.