England conceded the opening goal of the game in the third minute after Ansgar Knauff volleyed home, and Germany added a second in the 33rd minute through Nelson Weiper.
The Young Lions did get a consolation goal through Alex Scott late on, but Carsley said after the game that the first half performance was not up to scratch, which led to three half-time substitutions.
"The first half was nowhere near good enough. The way we started the game, the goals that we conceded were very disappointing.
"It was important that they knew that, and the changes we made at half-time, we could have made any number of changes. I asked for a reaction in the second half, and we definitely saw a reaction. We created a lot of opportunities again, and we need to be clinical...
"There was definitely a bit of shell-shock, going down 2-0 so soon, and we didn't start well against Slovenia either, so that's something we need to address."
Despite that early deficit, Carsley believes that the scenario for his players can be beneficial going into the knockout stages.
He explained: "The experience of going 2-0 down in a major tournament whilst it's on TV back home and the way we responded second half will hold them in good stead for the future."
The Young Lions did improve in the second half, but finished the group stage with four points, having won one game, drawn one and lost another.
It sets up a last-eight clash with Group A table toppers Spain, who will provide a different test to what England have faced so far.
Carsley is under no illusions that his side will need to improve if they are to progress in the tournament.
He added: "We have to take the chances that we create, the amount of chances we create and not converting is something we need to work on.
"The quality of a team like Spain, we can't afford to miss those chances...
"If we give Spain a two-goal headstart, it's game over."
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