Michelle Martin, Published 02/09/2014

Weak investment spending and slow trade led Germany to contract for the first time in over a year in the second quarter, data showed, suggesting Europe’s largest economy is running out of steam just as the impact of the crisis in Ukraine starts to bite.

Germany’s Federal Statistics Office confirmed yesterday an earlier estimate showing a 0.2pc contraction in seasonally-adjusted gross domestic product (GDP) on the quarter.

The disappointing performance of an economy once considered the last bastion of growth in a sickly euro zone echoed the region’s second and third largest economies, France and Italy, which respectively stagnated and fell back into recession over the same period.

“The second-quarter contraction was a reaction to the strong first quarter so I think we’ll return to moderate positive growth in the third… but there’s no shortage of uncertainty factors at the moment,” said Thilo Heidrich, an economist at Postbank, referring to the standoff between Moscow and the West over Ukraine and the crisis in Iraq.

Gross capital investment in Germany fell by 2.3pc and construction investment dropped by 4.2pc, in part due to a mild winter which boosted building activity in the first quarter.

Mr Heidrich said a 0.4pc drop in plant and equipment spending could be partly due to the Ukraine crisis and sanctions against Russia.

Foreign trade, traditionally the driver of German economic growth, subtracted 0.2 percentage points from growth, while private consumption and inventories made a positive contribution.

Irish Independent