Preliminary figures show that Germany's economy shrank in the final three months of last year, despite recording growth of 3% for the whole of 2011.
The country's Federal Statistics Office said gross domestic product (GDP) fell by around 0.25% in the fourth quarter of last year compared with the previous three months.
But figures for the full year showed that Germany weathered Europe's debt crisis better than other euro zone countries, driven by foreign as well as domestic demand.
GDP grew by 3%, below the previous year's growth rate of 3.7% - the fastest since reunification - and in line with forecasts.
Growth was mainly driven by exports and strong demand at home, the statistics office said.
Private consumption grew 1.5% last year compared with 0.6% in 2010, helped by a further fall in German unemployment.
The country's jobless rate fell in December to the lowest level since reunification two decades ago, while surveys showed new orders and jobs growth in the services industries helped its private sector to expand.
"The economic recovery took place primarily in the first half of the year," Roderich Egeler, the head of the statistics office, told a news conference. "2011 saw strong private consumption," he added.
Germany's export-driven economy recovered quickly from the 2008/09 financial crisis, but began to feel the pinch late last year as the debt crisis spread from Greece to its key trading partners in the euro zone and weighed on the real economy.
Germany also succeeded in lowering its public deficit to 1% of gross domestic product (GDP) last year, according to the figures.
German five-year bond yield below 1%
Germany has paid a record low rate at an auction of five-year bonds this morning amid huge demand, suggesting nervous investors are flocking to the safe-haven status of Europe's top economy.
Germany received bids of nearly €9 billion for the €4 billion of its five-year bond offered. It sold €3.2 billion of the bond, holding some back to sell on the secondary market - a standard practice.
The average yield, or rate of return on the bond was 0.9%, said the German Finance Agency, which organised the sale. It was the first time the five-year yield has dropped below the 1% mark.
On Monday, an auction of six-month German bonds delivered a negative yield, meaning investors effectively paid the government to take their money.
This highlighted the status of Europe's biggest economy as a secure place to park cash in the current debt crisis. Investors trust the German government to pay them back but have less confidence in other countries.
