Germany in recession as economy slips in Q1

Berlin, May 25

The German economy contracted in the first quarter of 2023 compared with the previous three months, thereby entering recession, data from the statistics office showed on Thursday.

Immense inflation

Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him. Andreas Scheuerle, analyst, dekabank

The gross domestic product fell by 0.3% for the quarter when adjusted for price and calendar effects, a second estimate showed. This follows a decline of 0.5% in the fourth quarter of 2022.

A recession is commonly defined as two successive quarters of contraction. The first estimate had shown GDP stagnating in the first quarter and Germany skirting a recession. Year-on-year, GDP fell by 0.5% when adjusted for price and calendar effects.

Growth likely in Q2

• German Bundesbank expects economy to grow modestly in Q2 as a rebound in industry more than offsets stagnating household consumption and a slump in construction
• Investment also up in 1st three months of the year, following a weak 2nd half of 2022

Household consumption was down 1.2% quarter-on-quarter after price, seasonal and calendar adjustments. Government spending also decreased significantly by 4.9% on the quarter.

“The warm winter weather, a rebound in industrial activity, helped by the Chinese reopening, and an easing of supply chain frictions, were not enough to get the economy out of the recessionary danger zone,” ING’s global head of macro Carsten Brzeski said.

By contrast, investment was up in the first three months of the year, following a weak second half of 2022. Investment in machinery and equipment increased by 3.2% compared with the previous quarter, while investment in construction went up 3.9% on quarter. There were also positive contributions from trade. Exports rose 0.4%, while imports fell 0.9%. — Reuters

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