Germany Stalls

There was some slightly sobering news out of Germany yesterday, when the German government announced that the nation's economy had shrunk slightly in the fourth quarter of 2011, with a loss to GDP of 0.25 percent. Moreover, Germany's finance minister said he expected the economy to contract in the first quarter of 2012 as well. That would technically put Germany into recession, which is defined as two consecutive quarters of contracting GDP.

Since Germany is the financially healthiest of the members of the European Union, it's a little scary to think that it might be sliding into recession. With an economy strongly dependent on exports to its European trading partners, Germany is hobbled by the reduced purchasing power of struggling countries like Greece, Spain and Italy. The fear of course, is that the reduction in economic activity will eventually spread over here to the U.S.

At the same time, though, it's easy to overstate the German economic woes. The loss in GDP last quarter was very small, and the German government also announced that the nation's economy had grown by 3.0 percent in all of 2011. By contrast, the growth in America's GDP last year - scheduled to be announced on January 29 - is expected to be about one percentage point below that.