All the organizations pointed to it, but there was still no confirmation that came this Thursday from the German Federal Statistical Office (Destatis): the country entered a recession in the first quarter of the year when its GDP fell by 0.3% from January to March. At first, the statistical office predicted 0% growth, but with the final data for the quarter it has confirmed that the 0.3% drop in this quarter after having fallen 0.5% in the fourth quarter of 2022 has the country into a technical recession.
“After GDP growth entered negative territory at the end of 2022, the German economy has now recorded two consecutive negative quarters,” Ruth Brand, president of the Federal Statistical Office, confirmed Thursday in a statement.
In this way, the German economy has registered the worst performance among the large economies of the euro area, since Spain and Italy grew by 0.5% and France by 0.2%, according to the latest data from the OECD. On average, the euro zone advanced by 0.1% and the GDP of the United States grew by 0.3% in the same period, which leaves Germany distant from the major world powers due to the impact of the war in Ukraine and the rise in energy costs in its economy.
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In fact, in its Destatis analysis, the “ballast” for the German economy of the strong price rises stands out, which was reflected especially in household final consumption spending, which decreased by 1.2% in the first quarter of 2023 This greater reluctance of households to buy was manifested in lower spending on food and beverages, clothing, and footwear in the first quarter compared to the previous quarter.
In addition, German families bought fewer new cars, partly due to the discontinuation of subsidies for plug-in hybrids and the reduction of subsidies for electric vehicles in early 2023. On the other hand, public spending also decreased considerably in the first three months of 2023, with a contraction of 4.9% compared to the previous quarter.
On the contrary, the office highlights that investment increased from the fourth quarter of 2022 and positive contributions from foreign trade were also registered, since, compared to the fourth quarter of 2022, exports of goods and services increased by 0.4 %. Conversely, imports fell by 0.9%, due to reduced purchases of mineral fuels, such as oil and chemical products.
Employment continues at very high rates in Germany, which closed the first quarter with a total of 45.6 million employed people, which implies an increase of 446,000 workers, 1% more than the previous year.
Improves consumer confidence
Despite having entered a technical recession, the German consumer confidence index registered an improvement of 1.6 points in June, according to the index prepared by GfK, which stood at -24.2 points, compared to -25.8 from the previous month, which represents the eighth consecutive increase in the indicator.
Still, the confidence level of German consumers remains well below the levels of spring 2020, during the first pandemic lockdown.
One of the pillars supporting the recovery of consumer confidence continues to be income expectations, which increased in May for the eighth consecutive month, with an increase of 2.5 points and standing at -8.2 points.
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