A shock fall in German industrial production in December confirmed the eurozone crisis caused Europe (Chicago Options: ^REURUSD - news) 's largest economy to shrink at the end of 2011, economists said.
Industrial (Mexico: ST2000.MX - news) output fell 2.9pc on a monthly basis, which was sharply below the 'no change' in production levels economists had forecast.
It means German production fell by about 2pc on a quarter-on-quarter basis in the final three months of 2011, despite an upward revision for November (Stuttgart: A0Z24E - news) to zero compared with an earlier estimate of a 0.6pc fall.
Carsten Brzeski, economist at ING, said the data provided "the final piece of evidence that the German economy shrank in 4Q 2011, for the first time in almost three years.
"This time around, the eurozone debt crisis finally took its toll on the German economy, forcing companies to reduce production," he added.
The fall was driven by widespread weakness, although the construction sector performed particularly badly with output down 6.4pc in December. Manufacturing output fell by 2.7pc.
Economists said December could however prove to be the low point for the German economy.
"We continue to believe it likely that the Q4 2011 GDP contraction will remain a temporary soft patch," said Thomas Harjes, economist at Barclays Capital.
"A modest recovery should begin in Q1 2012, as indicated by a brighter business outlook revealed in recent surveys and stronger factory orders in December, especially from overseas," he said.
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