The German economy shrank in the third quarter. The gross domestic product (GDP) fell by 0.1 percent from July to September, as the Federal Statistical Office announced in a flash estimate on Monday. Economists surveyed by the Reuters news agency had even expected a decline of 0.3 percent.
According to revised figures, the economy achieved slight growth of 0.1 percent in the spring. Initially there was talk of stagnation. The high interest rates, the still strong price increases and the weak global economy have an inhibiting effect. However, initial sentiment indicators signal an end to the downward trend. The barometer for the Ifo business climate rose in October for the first time in six months. According to Ifo economic expert Klaus Wohlrabe, GDP could grow slightly again in the current fourth quarter. There could be an increase of around 0.2 percent compared to the summer quarter.
The federal government recently lowered its economic forecast for 2023 as a whole and now expects gross domestic product to shrink by 0.4 percent. This means that Germany is the only large industrial nation that is unlikely to grow this year.
However, there are also subtle positive signals. “The economic misery is entering the next chapter. Thanks to the upward revisions, the situation at least looks less bleak,” says chief economist Alexander Krüger from Hauck Aufhäuser Lamp Privatbank. The first sentiment indicators also signal that the trough may have bottomed out. The barometer for the Ifo business climate rose in October for the first time in six months.
According to LBBW economist Jens-Oliver Niklasch, Germany’s economy is more or less standing still: “The balance sheet should also be similar in the final quarter of 2023. Only for the period after that can one become a little more confident.” According to KfW chief economist Fritzi Köhler-Geib, the economy is likely to improve again next year thanks to falling inflation and rising incomes, primarily through consumption. The government also expects this: According to the government forecast, there will be growth rates of 1.3 and 1.5 percent again in 2024 and 2025, and in 2022 it was 1.8 percent.