Winter recession: German economy shrank at the start of the year

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In the initial forecast, the authority assumed that economic output would stagnate at the start of the year.

“After GDP had already dipped into the red at the end of 2022, the German economy recorded two negative quarters in a row,” said Ruth Brand, head of the institution. If economic output shrinks for two consecutive quarters, economists speak of a technical recession. This does not mean that the whole year is negative. Thanks mainly to the mild winter, worst-case scenarios did not materialize – such as a lack of gas that could leave deep wounds.

Given inflation, private consumption failed to support the economy. According to the information obtained, households spent less on food-beverage, clothing, shoes and furniture compared to the previous quarter. High inflation is a challenge for consumers: it erodes their purchasing power. People can afford less for a euro. The upward pressure on prices has weakened recently. However, the annual inflation rate in April was still relatively high at 7.2 percent.

According to statisticians, positive momentum came from exports and investments at the beginning of the year. At the same time, due to the favorable weather conditions, construction investments and equipment investments of companies such as machinery, devices and vehicles increased.

Prospects for Europe’s largest economy as a whole are under pressure throughout the year, experts say. The International Monetary Fund assumes that economic growth will likely hover around the zero line. Therefore, the IMF is more pessimistic than the federal government, which expects GDP growth to be 0.4 percent in its spring projection presented at the end of April. In its latest forecast, the EU Commission had expected economic growth of 0.2 percent for Germany.

(SDA)

Source :Blick