The 4-0 opening demolition of Australia had generated talk of his youngsters emerging as serious title contenders but defeat at the Nelson Mandela Bay stadium has left them with work to do to make it out of the first round.
While Loew is confident his side will progress Germany now face Ghana in their last Group D tie with the unwanted pressure of requiring a win to be sure of qualification.
This was not Germany's day, with Miroslav Klose sent off for a second yellow card in the 37th minute, Serbia scoring one minute later, then Lukas Podolski missing a second half penalty.
"Lukas always scores from the penalty spot, so I left it up to him and Bastian Schweinsteiger to decide which of them took the penalty," said Loew.
"They are both excellent penalty takers, I leave the decision up to the player who feels brave enough to score.
"Lukas didn't take a good penalty, he usually hammers the ball home, this time it was relatively easy for the keeper to parry the ball away.
"Lukas had many other chances, but he had a problem today, I don't know why he wasn't hitting the target."
German captain Schweinsteiger summed up the mounting frustration of fellow players at the World Cup when he said the number of red cards was making the tournament no fun.
"If there is a red card at this World Cup in every game, you have to wonder where the sense is," said Schweinsteiger.
"It doesn't make it much fun.
"I am lost for words. I am furious and bitterly disappointed."
Serbia's victory put them level on three points with Germany while Ghana - who also have three points - play pointless Australia on Saturday.
The Germans round off their group campaign against Ghana next Wednesday while Serbia play Australia.
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