Joachim Low's men won 1-0 at Wembley thanks to Per Mertesacker's towering header in the 39th minute, adding to England's 2-0 setback against Chile on Friday, the first time they have suffered back-to-back home defeats since 1977.
And while Hodgson was happy with some aspects of his side's performance as they continued their preparations for the 2014 World Cup, he admitted they were made to pay for failings at both ends of the field.
Hodgson said: "I thought it was a harsh defeat but we needed better quality.
"The effort, the work rate and desire, I can't fault at all. But in the time we had the ball in the German half, we weren't as efficient as the Germans were when they had the ball in our half.
"The quality of our passing and shooting was not as good as the Germans and we paid the price for set-pieces.
"We knew set-pieces would be a danger, they had some big players and we were a small team."
Hodgson singled out goalkeeper Joe Hart for particular praise, with the recently-dropped Manchester City man putting his club woes to one side with a fine display for his country.
He said: "I am delighted for him. He has come under a lot of criticism recently, so I was delighted he has repaid everyone's faith in him.
"We have always thought he was our goalkeeper and tonight I think he has proved that. He wasn't snowed under, but he did have some very important saves to make."
Reflecting on the two games, he added: "We've used a lot of players and I think it's been a positive exercise.
"We've learnt a lot, positively on some occasions and on others negatively, but I'm rather disappointed that people have come to watch us in these two games and we've not been able to send them home with a good result."