FRANKFURT, Feb 13, 2009 (AFP) - The German economy shrank by a sharp 2.1 percent in the fourth quarter of 2008, the fastest contraction since 1990, official data showed Friday.

"That was the largest quarter-on-quarter decrease" on record since German reunification in 1990, the Destatis national statistics service said, and confirmed the economy had slumped deeper into recession at the end of 2008.

The bigger-than-expected drop compared with the third quarter was mainly the result of a collapse in exports, the chief source of growth in Europe's biggest economy, Destatis said.

Economists polled by Dow Jones Newswires had expected a fall of 1.8 percent.

Economic activity had already contracted by 0.5 percent in the second and third quarters of the year, the statistics service noted.

Both capital investment and trade were major factors in the fourth-quarter decrease, but consumption was down as well, in particular that by households.

Consumers were concerned by a slowing rate of employment, even though for the entire year Germany created 422,000 new jobs, an increase of 1.0 percent on an annual basis.

Quarterly employment gains "decreased markedly since the beginning of 2008" however, Destatis said.

It will release more detailed results on February 25.