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BERLIN, May 15 (Reuters) - German gross domestic product (GDP) contracted by a much larger than expected 3.8 percent in the first three months of 2009, easily its worst performance since reunification in 1990, preliminary data showed on Friday.
The Federal Statistics Office said the quarter-on-quarter contraction was led by a sharp decline in exports, which fell at a faster rate than imports, and by a drop-off in investment.
The euro fell sharply against the dollar and Bund futures reversed early losses on the GDP drop, which was far steeper than the 3.0 percent contraction predicted by economists in a Reuters poll.
"This is a dramatic plunge and a worse start to the year than we could have imagined," said Juergen Michels, an economist at Citigroup in London.
"It can't get much worse, but not much better either. It is questionable whether the economy will grow again this year."
The government slashed its economic forecast for the full year late last month and now expects a 6 percent contraction, led by weakness in exports. It is predicting only meagre GDP growth of 0.5 percent next year.
The first quarter contraction was the fourth in a row, the first time since reunification that the German economy has suffered so many consecutive quarters of negative GDP.
The Statistics Office said fourth quarter GDP, previously the worst quarter on record, was revised down to a contraction of 2.2 percent. Previously, it had reported a decline of 2.1 percent.
Year-on-year, the economy shrank by 6.7 percent after a 1.7 percent decline in the October-December period.
Adjusted for working days, German GDP contracted by 6.9 percent on the year in the first quarter. The Office is due to publish a detailed breakdown of the first quarter GDP figures on May 26. (Writing by Noah Barkin; Editing by Kim Coghill)