German manufacturing (Photo: Reuters)
German manufacturing (Photo: Reuters)

German gross domestic product shrank by 0.6 percent in the fourth quarter, compared with the previous three months, as  foreign trade dragged Germany's economic growth lower.

The Federal Statistics Office confirmed the shrink in GDP compared with the previous year where GDP grew by 0.1 percent.

In a further sign the euro zone crisis is hitting Europe's largest economy hard foreign trade deducted 0.8 percentage points from GDP while domestic demand added 0.2 percentage points.

On Thursday, Markit data revealed that the Eurozone may not exit recession until third quarter.

The Markit Eurozone PMI Composite Output Index fell to 47.3 in February from 48.6 the previous month signalling a steepening economic downturn.

With a reading of less than 50 indicating a contraction in activity, Rob Dobson Chief Economist at Markit said the data suggests that the Eurozone may not exit the recession until the third quarter this year.