German economy narrowly escaped technical recession

The German economy was unable to grow in the first quarter of this year as unusually high inflation and rising interest rates suppressed consumer spending.

According to main data from Germany’s Federal Statistical Office (Destatis), the country’s seasonally and calendar-adjusted GDP registered zero growth in January-March 2023 compared to the previous quarter. The market expectation was that the largest economy in Europe and the fourth in the world would grow by 0.2 percent.

Thus, after zero growth in the first quarter, the German economy did not enter a technical recession, which is expressed as “two quarters of GDP contraction”. The German economy contracted 0.5 percent in the last quarter of last year.

THE DECREASE IN CONSUMER EXPENDITURES SLOWED GROWTH

Positive contribution to quarterly growth; came from investments and exports.

In the first quarter, lower consumer spending due to decreased purchasing power due to high inflation held back growth.

Annual GDP growth in the first quarter, adjusted for calendar effects, was minus 1 percent.

Although the bottlenecks that arose during the Covid-19 epidemic have eased, the German economy is negatively affected by stagnant demand as a result of rising interest rates, declining confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

The German government expects 0.2 percent growth in the economy this year. Leading German economic institutes predict the country’s economy will grow 0.3 percent this year. (AA)