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Germany economy contracted.

The Ger­man eco­nomy con­trac­ted 0.2 per cent in the final quarter of last year, as high gas prices

Germany

squeezed demand and placed the euro­zone’s largest eco­nomy on the brink of reces­sion. However, fears of a reces­sion had eased this month when offi­cials said the eco­nomy was likely to have stag­nated, rather than shrunk, in the fourth quarter. «High rates of infla­tion have driven the Ger­man eco­nomy into a winter reces­sion,» said Timo Wollmer­shäuser of the Ifo Insti­tute, a think-tank. In response, eco­nom­ists down­graded their expect­a­tions for the euro­zone growth fig­ure to a 0.1 per cent fall, down from a no-change fore­cast before the release of the Ger­man fig­ures.

The GDP drop «pours cold water on the recent optim­ism about the pro­spects for the euro­zone and sug­gests that a tech­nical reces­sion in both Ger­many and the euro­zone as a whole is more likely than not, after all», said Fran­ziska Pal­mas, senior Europe eco­nom­ist at Cap­ital Eco­nom­ics. «We are look­ing at a tech­nical reces­sion,» said Stefan Schneider of Deutsche Bank, «not the set­back to growth that many had recently feared». Ger­man offi­cials upgraded the eco­nomy’s expan­sion in the pre­vi­ous three-month period from 0.4 per cent to 0.5 per cent. «After the Ger­man eco­nomy held up well in the first three quar­ters des­pite dif­fi­cult con­di­tions, eco­nomic out­put decreased slightly in the fourth quarter,» Des­tatis, the fed­eral stat­ist­ics office, said yes­ter­day.

Lead­ing eco­nom­ists polled by Con­sensus Eco­nom­ics expect the Ger­man eco­nomy to con­tract by 0.5 per cent this year, while the euro­zone eco­nomy is fore­cast to expand mar­gin­ally. Timo Klein, eco­nom­ist at S&P Global Mar­ket Intel­li­gence, said Ger­many’s out­look had «brightened» in recent weeks, thanks to mild winter weather, which had reduced gas demand and the end of China’s zero-Covid policy, which would boost Ger­man exports. But oth­ers believe ECB interest rate rises and the risk of sus­tained high energy prices threaten the return to growth. 

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  1. Clyde31 January 2023 at 13:20

    I knew those optimistic news about Germany last month were not the whole truth. It was clear the German economy also had been suffering although it's still resilient. We need to keep our expectations in check as this is probably the way things will go in 2023 with small wins and stagnations and small losses when it comes to the economy of Germany and the EU as a whole.

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    1. Simon31 January 2023 at 13:39

      I was expecting this kind of news as well. All things considered, Germany is doing pretty well and I hope things stay at least the same and don't get worse.

      Delete
  2. Albert31 January 2023 at 14:32

    Not a huge contraction. I was honestly expecting much more than this, maybe a 0.5 but it looks like their economy is holding on. Things might look different in 2-3 months (in a bad way) and only get better in the next 4-6 months I think.

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