The German economy is in recession after the first quarter of the year was revised downward to a contraction of 0.3 percent.
The revision means a second consecutive quarter of economic decline for Europe’s largest economy after Germany’s gross domestic product (GDP) fell by 0.5 percent in the last quarter of 2022.
“After GDP growth entered negative territory at the end of 2022, the German economy has now recorded two consecutive negative quarters,” says Ruth Brand, president of the Federal Statistical Office, meeting the technical definition of an economic recession.
“It took a couple of statistical revisions, but at the end of the day, the German economy actually did this winter what we had feared already since last summer: It fell into a technical recession,” said Carsten Brzeski, global head of macro at the Dutch bank ING.
“The persistence of high price increases continued to be a burden on the German economy at the start of the year. This was particularly reflected in household final consumption expenditures, which was down 1.2 percent in the first quarter of 2023 after adjustment for price, seasonal and calendar variations,” the stats office noted.
Consumers spent less on food and beverages, clothing and footwear, and furnishings in Q1 of 2023 compared to the previous quarter.
In industry, while manufacturing recorded considerable growth of 3.2 percent year-over-year, the construction industry experienced a year-over-year drop of 0.7 percent. Trade, transport, and accommodation and food services all suffered slight decreases in economic performance compared to last year.
“Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him,” Andreas Scheuerle, an analyst at DekaBank, told Reuters.
German inflation stood at 7.2 percent in April, above the eurozone average of 7 percent.
In its estimate published last month, the International Monetary Fund (IMF) predicted Germany will be the only major advanced economy in the world to shrink this year, with growth expected to be near zero.
