Despite the energy crisis and high inflation, the German economy grew surprisingly in the third quarter. Gross domestic product (GDP) rose 0.3 percent from the previous quarter, the Federal Statistical Office’s first estimate on Friday showed.
Given the economic consequences of the Ukrainian war, economists expected a decline in economic output on average. They expect Europe’s largest economy to shrink and fall into recession in the coming quarters.
After a slight increase of 0.1 percent in the second quarter, the Wiesbaden official announced that the German economy maintained its position despite the difficult global economic conditions with the ongoing corona epidemic, deteriorating supply chains, rising prices and the war in Ukraine. Economic output was primarily supported by private consumer spending.
In the annual comparison, GDP, adjusted for price, seasonal and calendar effects, has even surpassed the pre-corona crisis level for the first time.
Economists assume that the German economy is facing a tough winter. Consumer sentiment has stabilized a bit lately. The situation remains tense, according to GfK consumer researchers. “As long as inflation remains high and there are doubts about an unlimited energy supply, the consumer climate will not recover visibly and sustainably,” said GfK consumer expert Rolf Bürkl.
High energy prices are also a growing burden for many companies in Germany. The mood in the economy deteriorated again in October. Ifo business environment index decreased by 0.1 points compared to the previous month and decreased to 84.3 points. “The mood in the German economy remains bleak,” said Ifo President Clemens Fuest.
For 2022 as a whole, forecasts predict growth for the German economy. For the coming year as a whole, economists expect a decline in economic output. According to some economists, while the upcoming economic downturn will likely be more severe than in many other European countries, it will not be as bad as the 2020 Corona crisis. At that time, Europe’s gross domestic product, the largest economy, had shrunk by more than four percent.
The federal government still expects economic growth of 1.4 percent this year, and a 0.4 percent decline is expected next year. However, the labor market is still strong. The traffic light coalition wants to support consumers and companies due to high energy prices with a “defense shield” of up to 200 billion euros.
(SDA)