German economy shows signs of recession
2023.02.24 06:42
German economy shows signs of recession
By Ray Johnson
Budrigannews.com – As household consumption and capital investment were impacted by inflation and the energy crisis, the German economy contracted more than anticipated in the final three months of 2022.
The statistics office reported on Friday that the fourth quarter of 2022 saw a 0.4% decrease in the German economy compared to the previous three months.
Adjusted for price and calendar effects, preliminary office data indicated a 0.2% quarter-on-quarter contraction. When compared to the previous three months, gross domestic product experienced a slight increase of 0.5 percent in the third quarter of 2022.
According to Carsten Brzeski, global head of macro at ING, a second consecutive drop in the Ifo’s current assessment component, a falling manufacturing PMI, low consumer confidence, and a willingness to spend close to historical lows all point to a contraction of the German economy in the first quarter.
The fourth quarter’s disappointing end result raises concerns of a winter recession. It is common to define a recession as two consecutive quarters of contraction.
Commerzbank (ETR:) states, “Today’s numbers show that the sharp rise in energy prices has slowed the economy noticeably despite the government’s extensive aid measures.” Ralph Solveen, an economist, said. Solveen stated that a noticeable economic recovery is unlikely in light of the global tightening of monetary policy.
According to the statistics office, consumers spent less in the fourth quarter than in the third quarter after relief measures like the fuel discount and the 9-euro transportation ticket ended. Government spending increased 0.6% in comparison to the previous quarter, while household spending decreased by 1.0%.
The statistics office says that investment also affected how well the economy did. Adjusted for inflation, seasonality, and calendar effects, machinery and equipment investment decreased 3.6% in the fourth quarter, while construction investment decreased 2.9%.
When compared to the third quarter, exports of goods and services decreased by 1.0% in the fourth quarter. According to the statistics office, this was because of the difficult international situation, which was characterized by persistent disruptions in supply chains and high energy costs.
