Germany's recession in the first half of the year was due mainly to a sharp drop in the exports, statistics office data showed this morning.
In a breakdown of data released last week, the Federal Statistics Office confirmed overall gross domestic product shrank at a quarterly rate of 0.1 per cent in the three months to the end of June, adding to a 0.2 per cent drop in the first quarter.
Higher public and construction spending in the second quarter was not enough to offset a sharp drop in exports. Exports also fell in the first quarter, compared with a previously reported rise, the data showed.
The weak data helped drag the euro below technical support at $1.1050, down to its lowest levels in four months, as investors bet the US economy will emerge faster from the global slowdown of the past two years.
The single currency hit a lifetime high against the dollar above $1.19 in May and equalled it in June. Despite a recent dip it remains up some 12 per cent in the year against the dollar.
The move has left some German companies nursing losses ondollar sales converted back into euros.
Most private sector analysts expect Germany's economy to pick up this year following positive survey data from both Germany and the United States, but none expect growth to come near the government's official 0.75 per cent forecast.
The government has also begun lowering expectations, ahead of a regular review of its forecast in October.
In a report yesterday, the finance ministry said it now expected a recovery to start only in the fourth quarter, compared to earlier projections of a stronger second half.
The Statistics Office data showed stock building by companies contributed positively to GDP in the second quarter, but private consumption stagnated despite reports from high street retailers of a pick-up in sales.