German Economy Entered Recession as Inflation Hurt Consumers

The German economy was in recession in early 2023 after household spending in Europe's economic engine finally succumbed to the pressure of high inflation, Reuters reported. Gross domestic product fell by 0.3% in the first quarter of the year when adjusted for price and calendar effects, a second estimate from the statistics office showed on Thursday. This follows a decline of 0.5% in the fourth quarter of 2022. A recession is commonly defined as two successive quarters of contraction. German GDP data showed "surprisingly negative signals," Finance Minister Christian Lindner said on Thursday. He added that comparing Germany with other highly developed economies, the economy was losing potential for growth. Robert Habeck, Germany's economy minister, said his nation's previous high dependency on Russia for energy supply led to the recession, but the growth forecasts were much bleaker. "Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him," said Andreas Scheuerle, an analyst at DekaBank. 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. Read more.

Location