Germany has emerged from a technical recession by a narrow margin, thanks to the fact that gross domestic product (GDP) stagnated in the second quarter of this year after two consecutive winter quarters of decline. All in all, the German locomotive continues to limp, with results inferior to its big neighbors in the eurozone, so the concern persists.
The GDP of the largest economy in Europe had zero growth between April and June, according to definitive data published yesterday by the Federal Statistics Office (Destatis), which confirm the provisional ones that advanced at the end of July. The German economy had recorded both contractions: by 0.1% in the first quarter and by 0.4% in the last quarter of 2022, with data adjusted for prices and seasonal variations. “After slight declines in the previous two quarters, the German economy stabilized in the spring,” Ruth Brand, president of Destatis, said in a statement.
However, industrial production is still weak (growing just 0.1% in the quarter) and sluggish global growth led to a 1.1% drop in German exports, a traditional mainstay of the economy. this country The decline in foreign demand – one of the main causes of this situation, according to a spokesman for the Ministry of Economy – was noticed above all by China, the main customer.
German business confidence also continued to decline in August for the fourth consecutive month, as indicated yesterday by the Ifo economic institute’s index, standing at 85.7 after the figure of 87.4 in July. The assessment of the current context fell to the lowest level since August 2020, with increasingly pessimistic expectations on the part of companies. “The German economy is still not out of danger”, said the president of the Ifo, Clemens Fuest.
Indeed, the Bundesbank, the German central bank, also warned in the August monthly bulletin, published earlier this week, that the German economy is going through “a phase of weakness” and indicated that “s “he expects economic production to stagnate more or less in the third quarter”. On the other hand, the Purchasing Managers’ Index (PMI) has registered significant setbacks in July and August, which suggests, according to the AFP agency, that another fall in German GDP is on the way during the quarter of summer
At this point, the Minister of Economy, the green Robert Habeck, yesterday insisted on the need for investments, one of the slogans of his party. Because, despite the fact that they have left behind the technical recession – that is, two consecutive quarters of GDP decline -, the German economy could still end the year in the red, at the tail end of the Eurozone countries. The main German economic institutes forecast to close 2023 with a fall in GDP of between 0.2 and 0.4%, given that the International Monetary Fund (IMF) estimates at 0.3%.
A positive point revealed yesterday is the slight increase in consumer spending, which rose 0.1% after two consecutive quarterly declines, according to Destatis. This is because the German labor market remains strong and there have been wage increases, and inflation is trending downward, although it remains high (6.5% in July).
