As of: January 30, 2024, 12:35 p.m
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“There are signs of a further decline in economic output for the first quarter of 2024.” © Karl-Josef Hildenbrand/dpa
The German economy was shrinking at the end of last year.
This puts a strain on the start of 2024. Economists currently see no signs of an immediate trend reversal.
Wiesbaden - Hopes for an early economic recovery in Germany are dwindling.
After a decline in economic output at the end of 2023, Europe's largest economy is heading into the coming months without any tailwind.
According to preliminary data, gross domestic product (GDP) fell by 0.3 percent in the fourth quarter of 2023 compared to the previous quarter, adjusted for price, calendar and seasonally.
The Federal Statistical Office confirmed an initial estimate.
In a European comparison, Germany ranks at the bottom of the list.
Thomas Gitzel, chief economist at VP Bank, currently sees no signs of an immediate economic trend reversal.
“Rather, it is to be expected that the German economy will continue to move between recession and stagnation in the coming quarters.”
According to preliminary information from statisticians, there was a significant decline in construction investments and companies' investments in equipment such as vehicles and machinery at the end of 2023 compared to the previous quarter.
“There are signs of a further decline in economic output for the first quarter of 2024,” said Commerzbank chief economist Jörg Krämer.
This is supported by the downward trend in industrial production, the recent decline in incoming orders and the low level of the Ifo business climate.
“After the recession ends, there is no strong recovery in sight.”
Prospects clouded
The prospects for the current year had recently deteriorated.
Many economists lowered their forecasts and expect growth of significantly less than one percent.
The German Chamber of Commerce and Industry (DIHK) expects stagnation at best.
Some economists also do not rule out a decline in gross domestic product in 2024 as a whole.
The attacks by Houthi rebels in Yemen on ships with alleged Israeli connections in the Red Sea are also currently causing concern.
Large shipping companies are therefore increasingly avoiding the important trade route.
The Red Sea crisis “may also impact prices.
This leads to delays and longer delivery times for the companies affected,” said a spokesman for the Federal Ministry of Economics to “Bild”.
Demand has fallen in almost all sectors of the economy
According to Ifo economics director Timo Wollmershäuser, companies in almost all sectors of the economy are complaining about declining demand.
In addition, the economy is burdened by a number of special factors.
“These include the high level of sickness, the strikes at Deutsche Bahn and the exceptionally cold and snowy January.
But there are initial rays of hope in private consumption.”
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German economy shrank in fourth quarter
The mood in the German economy deteriorated at the beginning of the year.
The Ifo business climate fell in January for the second month in a row.
According to the consumer research institute GfK and the Nuremberg Institute for Market Decisions (NIM), people's purchasing mood has also recently deteriorated again.
Hopes for a sustainable recovery in the consumer climate would have to be postponed further into the future.
Crises and wars as well as persistently high inflation unsettled consumers and prevented consumer sentiment from improving, it said.
Last year, private consumption in Germany failed to provide an important economic support.
At the same time, exporters felt the effects of the weakness in world trade, and increased real estate interest rates slowed down construction.
Economic output fell by 0.3 percent compared to the previous year, adjusted for prices.
Germany thus slipped into a slight recession.
Here too, the statisticians confirmed preliminary data.
Economics for easing the debt brake
Some economists are critical of the debt brake, saying it makes important investments in climate protection and infrastructure more difficult.
The “economic wise men” advocate comprehensive easing.
“We want to increase flexibility and create scope so that future-oriented public spending can be made without undermining the sustainability of state finances,” said the chairwoman of the Advisory Council for the Assessment of Overall Economic Development, Monika Schnitzer.
According to preliminary data from the European Statistics Office, economic output in the euro area stagnated in the fourth quarter of 2023 compared to the previous quarter.
The fastest-growing countries that have presented figures so far include Spain, with economic growth of 0.6 percent at the end of the year, and Portugal, with an increase of 0.8 percent.
In neighboring France, gross domestic product stagnated, while in Italy there was a slight increase of 0.2 percent.
In Ireland, however, GDP shrank by 0.7 percent.
dpa