GDP fell by 0.3 percent
German economy slides into recession
05/25/2023, 08:09 am
The worst is actually over: the German economy has so far been coping much better with the consequences of the Ukraine war than initially assumed. Nevertheless, German economic output fell by 0.3 percent in the first quarter. One of the reasons for this is private consumption.
The German economy slipped into a recession due to falling consumer spending by inflation-plagued consumers. The gross domestic product (GDP) shrank from January to March by 0.3 percent compared to the previous quarter and thus for the second quarter in a row, as the Federal Statistical Office announced on Thursday. It thus revised its original estimate from the end of April, which had still shown stagnation. If there are two negative quarters in a row, there is talk of a technical recession.
In the fourth quarter of 2022, economic output fell by 0.5 percent. The economy was slowed down by shrinking private consumption. This fell by 1.2 percent in the first quarter. One reason for this is likely to be the consumers’ loss of purchasing power as a result of high inflation. Government consumption also fell, by 4.9 percent. On the other hand, positive impetus came from investments, which grew by 3.9 percent.
Foreign trade also supported the economy. A strong upswing is not in sight for the time being. The Bundesbank expects at least slight growth in the spring. “In the second quarter of 2023, economic output should increase again slightly,” says the current monthly report. Easing delivery bottlenecks, high order backlog and lower energy prices should ensure a recovery in industry. “This should also support exports, especially since the global economy has regained some momentum,” the Bundesbank expects. The federal government expects GDP growth of 0.4 percent this year. In 2024, there should then be a stronger increase of 1.6 percent. For comparison: last year there was growth of 1.8 percent.