Daily Management Review

German Economy Continues To Lag In Q2 Following Winter Recession


German Economy Continues To Lag In Q2 Following Winter Recession
The second quarter of Germany's economy was flat compared to the first three months, showing no signs of recovery from the winter recession and solidifying its place as one of the worst major economies in the world.
The second quarter's zero growth figure matched a preliminary projection released in late July. In the second quarter, adjusted GDP fell by 0.2% year over year.
In the fourth quarter of 2022 and the first quarter of 2023, respectively, economic activity had decreased by 0.4% and 0.1% quarter over quarter. The technical criteria for a recession are two consecutive quarters of contraction.
"Both the short-term and the longer-term outlook for Germany looks anything but rosy," said Carsten Brzeski, global head of macro at ING.
Future economic activity in Germany is predicted to be hampered by poor purchasing power, thinned industrial order books, a slowdown in China's economy, and the effects of the most abrasive tightening of monetary policy in decades, according to Brzeski.
In the second quarter compared to the first, household consumption grew by zero percent, while government spending increased by 0.1%. The figures released on Friday also indicated a small increase in capital investment while exports decreased 1.1%.
According to Pantheon Macroeconomics, GDP will fall by 0.2% in the third quarter before increasing by 0.4% sequentially in the fourth quarter. Accordingly, the German GDP would decrease by 0.2% annually in 2023.
"If our forecasts for the rest of the big four eurozone economies are correct, this means Germany will be the worst performing among them," said Melanie Debono, senior Europe economist at Pantheon Macroeconomics.
In the third quarter, the Bundesbank anticipates that economic output will basically remain steady, according to a monthly report released on Monday.
Although a solid labour market, rapid wage growth, and falling inflation should stimulate private spending, the analysis predicted that industrial production will remain weak due to weak international demand.