Germany enters a technical recession after downward revision of its growth in the first quarter

The German economy entered recession in the first quarter of 2023, as confirmed by the Federal Statistics Office (Destatis), which revised gross domestic product (GDP) data for the first three months of the year to -0.3% Is. A pause was initially expected, but this data means a third consecutive quarter of decline in activity, following a -0.5% in Q4 2022. Two consecutive negative quarters,” confirmed Ruth Brand, chair of the Federal Statistics Office.

As such, the German economy recorded the worst performance among the large economies of the euro area, as Spain and Italy grew by 0.5% and France by 0.2%, while the average for the euro area was 0.1%. , the United States GDP grew by 0.3% in the first quarter. In his analysis, Destatis highlighted the pressure on the German economy from strong price growth, which was particularly reflected in household final consumption spending, which fell by 1.2% in the first quarter of 2023.

This greater reluctance of households to buy was manifested in lower spending on food and beverages, clothing and shoes in the first quarter of 2023 compared to the previous one. In addition, German households bought fewer new cars, likely due to the discontinuation of subsidies for plug-in hybrids and a reduction in subsidies for electric vehicles earlier this year.

For its part, the government’s final consumption expenditure also contracted significantly between January and March, with a contraction of 4.9% compared to the previous quarter. Instead, the Office highlights that investment has picked up since the fourth quarter of 2022, with an increase in gross fixed capital formation (+3.9%) in construction, partly due to good weather during the first quarter of 2023. The reason, while gross fixed capital formation in machinery and equipment was also significantly higher (+3.2%) at the beginning of the year.

Similarly, a positive contribution was also registered from foreign trade as the exports of goods and services increased by 0.4% as compared to the fourth quarter of 2022. In contrast, imports declined by 0.9% due to a decrease in imports of mineral fuels such as crude oil and petroleum products, and chemicals and chemical products.

labor market remains

On the other hand, Destatis indicated that economic performance was achieved in Germany with the employment of around 45.6 million people in the first three months of 2023, which means an increase of 446,000 workers (+1%) compared to the previous year. On average, the number of hours worked per worker was the same as in the first quarter of 2022 (-0.1%), while the amount of work in the economy increased by 0.9% over the same period. Global labor productivity (GDP adjusted for prices per hour worked by employed persons) fell 1% compared to the same quarter last year and labor productivity per employed person was down 1.1% in year-on-year terms .

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