The German economy shrank by 0.1 percent in the third quarter

2023-10-30 11:22:54

The German economy cannot get out of its misery. The real gross domestic product (GDP), i.e. adjusted for inflation, shrank by 0.1 percent in the third quarter compared to the previous quarter, the Federal Statistical Office announced on Monday in an initial flash estimate. This means that economic output has declined in three of the past six quarters since spring 2022. This year, according to slightly revised information, the growth rate is hovering around zero. In the period from July to September, real gross domestic product shrank by 0.1 percent, less than bank economists and analysts had expected.

The federal government expects economic output to decline by 0.4 percent for the year as a whole. The major economic research institutes had forecast a decline of 0.6 percent in September. According to international forecasts, Germany is the only country with a shrinking economy this year among the large industrialized countries in the Group of Seven.

The weak global economy, which is slowing down German exports, is seen as a negative factor in economic development. At the same time, German consumers have not yet overcome the shock of inflation and are holding back on consumption. According to the Federal Statistical Office, private consumer spending in particular continued to decline in the third quarter. On the other hand, positive impulses came from investments in equipment.

But the European Central Bank’s tighter monetary policy against inflation is putting a strain on investments by companies, particularly in housing construction. Criticism from business associations is also directed against the federal government’s economic policy line, which is not always clear, which increases uncertainty in German boardrooms and among consumers.

When does recovery begin?

Many economists expect the economy to recover at the end of the year. But not everyone shares this confidence. The government and institutes are forecasting an economic recovery in the coming year and a growth rate of 1.3 percent.

Published/Updated: Recommendations: 83 Patrick Welter Published/Updated: Recommendations: 9 Manfred Schäfers, Berlin Published/Updated: Recommendations: 4

Last year the German economy grew by 1.8 percent. But with energy prices rising sharply in the wake of the Russian attack on Ukraine, Germany experienced a surge in inflation since 2022, which put an end to the economic recovery after the pandemic. Over the course of this year, industry and consumption developed far worse than had been hoped in the spring. For the third quarter, the Federal Statistical Office will not announce details about the development of consumption or investments until the end of November.