German economic output surprisingly shrank by 2023.0 percent in the first quarter of 3. © Hendrik Schmidt/dpa
Stubbornly high inflation is dampening the buying mood of Germans. This has consequences for the economy at the beginning of the year. The outlook for the year as a whole is also subdued.
Wiesbaden - The German economy slipped into recession in winter. Gross domestic product (GDP) shrank by 0.3 percent in the first quarter compared to the previous quarter, the Federal Statistical Office announced on Thursday. In an initial estimate, the authority had assumed that economic output would stagnate at the beginning of the year.
"After GDP had already slipped into negative territory at the end of 2022, the German economy recorded two negative quarters in a row," says Ruth Brand, President of the Authority. If economic output shrinks for two quarters in a row, economists speak of a technical recession. This does not mean that the full year is negative. Mainly thanks to the mild winter, the worst scenarios did not materialize - such as a gas shortage that would have left deep scars.
Private consumption fails to support the economy
In view of inflation, private consumption failed to support the economy. For food and beverages as well as for clothing and footwear as well as for furnishings, households reportedly spent less than in the previous quarter. High inflation is a challenge for consumers: it eats away at their purchasing power. People can afford one euro less. The upward pressure on prices has weakened recently. However, the annual inflation rate in April was still at a comparatively high level of 7.2 percent.
According to the statisticians, positive impetus came from exports and investments at the beginning of the year. At the same time, construction investment also increased due to the favorable weather as well as corporate investments in equipment such as machinery, appliances and vehicles.
Prospects for the year as a whole subdued
According to experts, the outlook for Europe's largest economy is subdued for the year as a whole. The International Monetary Fund expects economic growth to hover around zero. The IMF is thus more pessimistic than the German government, which expected GDP growth of 0.4 percent in its spring projection presented at the end of April. In its latest forecast, the EU Commission expected economic growth of 0.2 percent for Germany. Dpa
