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Pedestrian zone in Stralsund: Consumer spending in particular fell in the fourth quarter
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Stefan Sauer / dpa
At the end of 2021, the Omikron wave slowed down the economy in Germany significantly, but not as much as feared.
The gross domestic product (GDP) shrank between October and December by only 0.3 percent compared to the previous quarter, as reported by the Federal Statistical Office.
The statisticians revised an earlier estimate of minus 0.7 percent.
Based on the year as a whole, the German economy reportedly grew by a revised 2.9 percent in 2021.
However, it was not yet able to compensate for the slump of 4.6 percent from the first year of the Corona crisis in 2020.
Recession is still looming
Consumer spending in particular fell sharply in the fourth quarter of 2021 – by 1.8 percent.
Stricter access regulations also applied to retailers, restaurateurs and service providers for weeks during this period.
Government consumer spending, on the other hand, increased by 1.0 percent, and construction investments stagnated compared to the summer.
The slump was the first decline in GDP since the first quarter of 2021. Many experts assume that the Omicron wave will also weigh on the economy in the current first quarter.
This could lead to a technical recession.
This is spoken of when economic power falls for two quarters in a row.
"Omicron and supply chains will remain obstinate spoilsports for the time being," said chief economist Alexander Krüger from the private bank Hauck Aufhäuser Lampe.
"A dynamic return to growth is out of the question for the current quarter." Economist Jens-Oliver Niklasch from LBBW also expects the economy to be still restrained at the start of 2022 - "especially since high inflation is usually a real brake on consumption".
Like most experts, he expects a noticeable revival from spring when the virus pandemic is likely to subside.
Russian invasion shock for German economy
According to Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK), which is close to the trade unions, economic forecasts are difficult to make in view of the currently escalating war in Eastern Europe.
The current figures said “relatively little about the prospects for the German economy for the coming months”.
In particular, it is questionable how the conflict will affect energy prices and thus also inflation and growth in Germany.
"Russia's invasion of Ukraine must be seen as a massive shock to the German economy, both on the supply and on the demand side," Dullien said.
The federal government expects economic growth of 3.6 percent for this year and a GDP increase of 2.3 percent for 2023, as Federal Minister of Economics Robert Habeck said in the Bundestag at the end of January.
"We have a robust economy and a stable labor market." At the beginning of the year, however, the momentum was still subdued due to the ongoing restrictions to combat the pandemic, according to the Green politician.
Apr/Reuters