Economists say worst over for Germany

Germany's economy shrank in 2003 for the first time in a decade as exports were too weak to offset lacklustre domestic demand…

Germany's economy shrank in 2003 for the first time in a decade as exports were too weak to offset lacklustre domestic demand, official data showed today, but economists said an upturn is under way.

The Federal Statistics Office said gross domestic product contracted 0.1 per cent, slightly below a consensus for an unchanged reading.

The data followed growth of 0.2 per cent in 2002, making 2003 the weakest year in three successive years of stagnation for Europe's largest economy, and helped push Germany's budget deficit above European Union limits for a second year in a row.

Statistics office president Mr Johann Hahlen said Germany had entered a weak recovery in mid-2003 which had become more pronounced towards the end of the year.

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"Overall the economic development was disappointing in Germany in 2003, like in the two previous years," Mr Hahlen told a news conference. "There were signs of a weak recovery in the second half of the year but one can't yet speak of a sustained revival."

But German economy minister Wolfgang Clement said in a statement shortly after the data were released that economic indicators showed the German recovery was gaining pace.

"The pent-up demand which has accumulated and the easing tax burden on consumers and business mean that we can hope to see a turnaround in investment and consumption," he said.

Germany has benefited in recent months as a global economic upswing boosted demand for German exports even as the euro strengthened to a series of record highs against the dollar, making German products more expensive outside the euro zone.

Industrial production, about a quarter of the economy, increased for a second straight month in November and new orders rose for a third month, suggesting output will expand further in the months ahead.