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Work on a high-voltage plant in Krefeld: high energy prices weigh on the economy
Photo: Jochen Tack / IMAGO
The German economy has now slipped into recession after all. Gross domestic product (GDP) shrank by 0.3 percent from January to March compared to the previous quarter, the second quarter in a row, the Federal Statistical Office announced on Thursday.
The Federal Office thus revised its original estimate from the end of April, which had still shown stagnation. Two negative quarters in a row are referred to as a technical recession.
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 loss of purchasing power of consumers as a result of high inflation. Government consumption also declined, 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 is likely to rise slightly again," according to the current monthly report. Easing supply bottlenecks, high order backlogs and lower energy prices are likely to ensure a recovery in industry. "This should also support exports, especially as the global economy has regained some traction," the Bundesbank expects.
The German government expects GDP growth of 0.4 percent this year. In 2024, it should then be enough for a stronger increase of 1.6 percent. By comparison, last year there was growth of 1.8 percent.
mic/Reuters