The German economy narrowly avoided the long-feared winter recession. The gross domestic product (GDP) stagnated from January to March compared to the previous quarter, as the Federal Statistical Office announced on Friday. Falling consumer spending prevented a better performance, while exports and investment both rose. The lull comes as a surprise, more had been expected in advance.
With two negative quarters in a row, there is talk of a recession that was just avoided. “Fortunately, the economy came out of this winter unscathed,” said the general manager of the German Chamber of Industry and Commerce (DIHK), Martin Wansleben. “A broad upswing, as would have been expected after the Covid years, is still not in sight.” Germany also experienced a weaker start to the year than other euro countries. The monetary union as a whole grew by 0.1 percent in the first quarter. France, the second largest economy after Germany, managed an increase of 0.2 percent despite weeks of strikes and protests against the pension reform. Italy and Spain even grew by 0.5 percent each.
A better start to the year for the German economy was prevented by falling consumer spending, who are not in the mood to shop as a result of the loss of purchasing power due to high inflation. Government consumer spending also decreased. “On the other hand, positive impetus came from investments and exports,” the statisticians explained. They want to announce details in May. “The German economy was divided at the beginning of the year,” said Timo Wollmershäuser, head of economic activity at the Munich Ifo Institute. “On the one hand, the industry is benefiting from easing supply bottlenecks and lower energy prices and has switched to a growth course.” On the other hand, high inflation is sapping purchasing power and causing consumption to shrink.
The weakening economy put the brakes on the usual spring revival on the German labor market in April. The number of unemployed fell by 8,000 compared to the previous month to 2.586 million, as the Federal Employment Agency (BA) announced. In the two previous years, however, there had been a decline of more than 50,000 in April. “The spring revival on the labor market will remain weak in April,” said the head of the Federal Employment Agency (BA), Andrea Nahles. “One of the reasons for this is the sluggish economy.” Overall, however, the labor market is in “stable condition”. The unemployment rate remained at 5.7 percent. Federal Economics Minister Robert Habeck expects growth of 0.4 percent this year. In 2024, gross domestic product is then expected to increase by 1.6 percent.