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New cars on a freight train, a symbol of hope for the economy
Photo: Hendrik Schmidt / dpa
German gross domestic product fell by 0.3 percent in the fourth quarter of 2023 compared to the previous quarter. The Federal Statistical Office in Wiesbaden announced this based on preliminary data - thereby confirming an initial estimate.
Many economists also expect a weak start to 2024. "There are the government's austerity measures, but also ongoing strikes by train drivers and disruptions to supply chains as a result of the military conflict in the Red Sea," said ING chief economist Carsten Brzeski. A further decline in the German economy in the first quarter of 2024 appears more likely.
According to Ifo economics director Timo Wollmershäuser, companies in almost all sectors of the economy are complaining about declining demand. In addition, the economy is burdened by a number of special factors. »These include the high level of sickness, the strikes at Deutsche Bahn and the exceptionally cold and snowy January. But there are initial rays of hope in private consumption.«
Inflation is likely to fall, wages to rise
The mood in the German economy had nevertheless deteriorated at the beginning of the year. The business climate determined by the Ifo Institute fell in January for the second month in a row. “The German economy is stuck in recession,” commented Ifo President Clemens Fuest.
Economic research institutes also lowered their forecasts for 2024, and some economists are not ruling out a further decline in gross domestic product for the year as a whole. The Bundesbank expects an increase of 0.4 percent in Germany in 2024. With these poor economic prospects, Germany is an exception among the industrialized nations.
Hopes for the current year rest primarily on people's desire to consume. “Thanks to strong real wage increases, private consumption in particular will probably increase again,” said KfW chief economist Fritzi Köhler-Geib. According to forecasts, inflation will fall this year while wages will rise at the same time.
However, according to the consumer research institute GfK and the Nuremberg Institute for Market Decisions (NIM), people's purchasing mood has recently deteriorated again. Hopes for a sustainable recovery in the consumer climate would have to be postponed further into the future. Crises and wars as well as persistently high inflation unsettled consumers and prevented consumer sentiment from improving, it said.
In 2023 as a whole, economic output fell by 0.3 percent compared to the previous year, adjusted for prices. Here too, the authority confirmed preliminary data. Last year, private consumption failed to provide an important economic support. At the same time, Germany's exporters felt the weakness of world trade, and rising real estate interest rates slowed construction.
apr/dpa