WIESBADEN: Europe's largest economy shrank by a greater margin in Q3 than predicted by economists, confirming that Germany has entered its worst recession in twelve or more years – driven down by collapsing demand for its exports amid the global financial crisis.

GDP fell by a seasonally adjusted 0.5% during the second quarter, reports the Federal Statistics Office in Wiesbaden said Wednesday. Not since 1996 has the nation's economy contracted this much over two consecutive quarters [the official definition of a recession].

As slower global growth saps export demand, German companies have cut-back production, as Bank of America's chief european economist Holger Schmieding acknowledges.

"The German recession has begun in earnest and it's very serious. It raises the risk of a German contraction of more than 1% next year and we will have to revise down our forecast for the euro area as well."

Data sourced from Bloomberg.com (Germany); additional content by WARC staff