Despite the headwinds in the summer, the German economy picked up its pace. As the Federal Statistical Office announced on Friday, gross domestic product (GDP) rose 0.4 percent in the third quarter from the previous quarter, thus increasing more than initially assumed. In the initial estimate, the Wiesbaden authority assumed a 0.3 percent price, seasonal and calendar adjusted increase in economic output.
Despite the ongoing corona epidemic, supply bottlenecks, rising prices and war in Ukraine, Europe’s largest economy, it grew as in the first two quarters of the year (plus 0.8 percent and plus 0.1 percent).
The growth in the July-September period was mainly driven by private consumer spending. Despite high inflation and the energy crisis, consumers benefited from the lifting of almost all corona restrictions in the third quarter, for example, to travel and go out more, as Wiesbaden officials explained.
Companies have invested significantly more in equipment such as machinery. On the other hand, construction investments decreased after adjusting for price, seasonal and calendar effects as in the second quarter. High building prices and higher mortgage interest rates are weighing on business.
Many economists expect a cold winter in Europe’s largest economy in the first half of the year. They assume a decline in economic output, but do not expect an economic collapse as in the 2020 Corona crisis. At that time, the gross domestic product shrank by more than four percent for the year as a whole.
“Downfalls, such as in the financial or corona crisis, are only possible in the event of a gas shortage, and we can avoid this thanks to full storage facilities and, above all, substantial savings efforts by companies and households,” said KfW. recently chief economist Fritzi Köhler-Geib. Commerzbank chief economist Jörg Krämer also referred to the federal government’s aid package. “I’m still waiting for a recession, but I’m not expecting any more economic collapse than usual.”
The persistently high inflation, which rose to 10.4 percent in October, is particularly worrying. High inflation rates burden companies and reduce the purchasing power of consumers. People can afford less for a euro. This can reduce private consumption, which is an important pillar of the economy. At the same time, the weakening in the global economy is likely to put pressure on exports, according to economists.
Global economic growth will slow next year due to Russia’s war of aggression in Ukraine, according to a forecast from the OECD, the organization of industrialized nations. Accordingly, global growth in 2023 should be only 2.2 percent. This is significantly less than expected before the war. “Higher inflation and lower growth are the heavy price the global economy has paid for Russia’s war against Ukraine,” a recently published study states.
Thanks to growth in past quarters, the federal government finally expected a 1.4 percent increase in economic output for the full year 2022. As a result of the expected weak winter half year, a 0.4 percent decrease is expected in the gross domestic product for the coming year compared to the previous year.
(SDA)