Eurozone GDP | Germany entered recession in the first quarter after a contraction of 0.3% of GDP

2023-05-25 08:39:31

Germany did not finally dodge the recessionby confirming a second consecutive quarter with its gross domestic product (GDP) under the sign of the contraction. Something that, in addition, occurs at a critical moment for the chancellor’s coalition Olaf Scholz.

The first economy of the euro zone registered a drop of 0.3% of GDP in the first quarter of the year, according to final data from the federal Department of Statistics (Destatis). This data, released this Thursday, follows the 0.5% with which the last quarterly period of 2022 closed, which in terms of experts is defined as a technical recession.

The Destatis figures fell like a bucket of cold water in Berlin. A few weeks earlier, the same official statistics department had eased the situation by publishing some provisional estimates that pointed to stagnation -or 0.0%-.

The main factor that has now pushed that data into the recession zone is the private consumption, which has fallen by 1.2% dragged down by the weight of inflation. The rise of consumer price index (CPI) It is no longer at the critical levels at which it was in the last quarter of 2022. In October the record level of 10.4% year-on-year had been set. In the following months, this record level has been contained until it fell to 7.2% year-on-year in April, Destatis recalled in its statement.

It is still, however, an excessive level to encourage private consumption, according to the analyst Jörg Krämer, from the public television ARD.

The descent of the inflation has been observed in a sustained manner, especially in the energy pricesto. In January, the increase in the CPI in this sector was still 23.1% year-on-year, while in February it had dropped to 19.1% and in March to 3.5%. The shopping basket On the other hand, inflationary levels continue to be very high: 17.2% year-on-year in April, compared to 21.8% in February and 22.3% in March.

Scholz’s tripartitemade up of social democrats, greens and liberals, put all its efforts from the start of the war in Ukraine and the energy crisis that resulted in articulating measures to contain the rise in prices in the sector and, at the same time, guarantee the security of supplies. That Germany did not run out of gas during the winter – as was feared with the cut off of shipments from Russia – was considered a management success by the Minister of the Economy, the green Robert Habeck.

But this containment or search for compensatory instruments in the energy sector has not been accompanied by similar measures in the shopping basket. To Habeck, the winter emergency over, criticism is now raining down on him even from his liberal coalition partnerswhich block the entry into the parliamentary process of one of its major bills -the progressive, but mandatory replacement of gas or oil heating by its renewable energy equivalents.

Habeck has gone from star member of the tripartite to minister on the verge of crashing. Added to the criticism of his management are a series of scandals for influence peddling and alleged plugging by officials he trusts.

Export

Destatis’s confirmation of a technical recession assumes it will be temporary cut and apparently without major macroeconomic impacts. There are positive impulses from the traditional engine of the German economy – the export– and from essential industrial sectors, such as machine building, household appliances and the automotive industry.

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Exports as a whole grew by 0.4% in the first quarter compared to the last of 2022. The labor market continues to register record employment, with 45.6 million working citizensin a country with about 83 million inhabitants.

But the Destatis figures come at a high point for Habeck and, by extension, for the whole of Scholz’s tripartite. The disagreements are continuous in the coalition and the pressure from the opposition is felt not only in the polls – right now the conservative opposition is seven points ahead of the chancellor’s Social Democrats. The mood among the allies is in tatters and Habeck himself accused the Liberals of “breaking his word” by blocking his bill from entering the parliamentary process.