Europe’s biggest economy was dented by lower exports and disruption to levels of car production, caused by new pollution tests that were introduced back in September.
Gross domestic product (GDP) contracted in the third quarter compared to the previous quarter by 0.2 percent, the Federal Statistical Office announced on Friday.
The last time Germany’s economic performance declined was three years ago in the first quarter of 2015.
The Federal Statistics Office confirmed a preliminary negative reading for the third quarter.
Earlier this month it was revealed the German car industry was struggling after being held back by new and more rigorous emissions tests.
The new WLTP emissions testing regime was brought into effect after the Volkswagen ‘dieselgate’ scandal, which saw millions of diesel motors fitted with “defeat devices” which could identify when they were being emissions tested.
It is believed the slump in the German auto sector was down to some car models not having timely approval for a new registration, forcing manufacturers to throttle production.
According to the figures released today, there was a 0.9 percent dip in exports in the second quarter.
However, consumers were still in the mood to spend as imports increased by 1.3 percent.
Private consumption fell by 0.3 percent compared to the previous quarter, partly due to people holding off from buying new cars.
Andreas Rees of Unicredit predicts the financial hiccup is only temporary and believes the German economy will soon be in the green again, forecasting growth in the coming year.
He said: ”The German economy will pick up again in the fourth quarter.”
Andreas Scheuerle of the Dekabank took a similar stance on Germany’s financial situation.
He said: “Germany has no economic problem, but a car problem.
“Despite all caution, most of the arguments currently point to the economic midsummer being followed by a mild autumn.”
Yesterday saw the German finance minister warn Brexit is a risk factor for growth in Europe.
Olaf Scholz warned remaining 27 member states will be lumbered with higher financial demands post-Brexit, as eurozone countries will provide more than 85 percent of EU economic output.
The German finance minister’s attack on Britain leaving the EU came as Ingo Kramer, the head of the BDA employers association, sparked fears over a slowdown in the German economy.
Speaking at a congress of the German employers’ association BDA in Berlin, Mr Kramer warned German growth in 2019 could be even lower than 1.5 percent.