Germany’s economy shrank in the second quarter, piling pressure on Chancellor Angela Merkel to unleash fiscal stimulus as manufacturers reel from a U.S.-China trade war.

Output fell 0.1% from the previous three months, in line with forecasts, as exports slumped. The economy has contracted in two of the last four quarters. Merkel said Tuesday the country was heading into a “difficult phase” and even hinted her reluctance to respond is softening.

Bund futures pulled back slightly after the report. Investors reacted to annual figures that were better than expected due to revisions of economic performance in previous quarters.

The contraction in Europe’s largest economy is weighing heavily on a region struggling to sustain momentum. Growth slowed in most euro-area countries including France and Spain, Italy is teetering on the verge of recession, and profit warnings from some of the bloc’s biggest companies suggest little sign of a turnaround.

The latest downbeat economic numbers come a day after Dusseldorf-based Henkel AG issued a profit warning that summed up Germany’s woes. The industrial firm is facing pressure on two fronts, a slowdown in the auto industry and weaker demand in China, the same environment that’s crippled manufacturing across the country.

President Donald Trump on Tuesday delayed the imposition of some new tariffs on Beijing by three months to December, buoying markets. However, there was further bad news from China, the world’s second-largest economy, on Wednesday, with cooling retail sales and the slowest growth in industrial output since 2002.

In Germany, sentiment among executives and investors has plunged, suggesting a government forecast for growth of 0.5% this year, the weakest since 2013, might still be too optimistic.

Second-quarter output was damped by trade, with exports falling faster than imports. Private consumption and government spending were higher than in the previous three months. Investment rose despite a decline in construction.