BERLIN, Feb 24 (Reuters) – The German economy has contracted more-than-expected in the last three months of 2022 as inflation and the energy crisis took their toll on household consumption and capital investment.
The German economy shrank by 0.4% in the fourth quarter of 2022 compared to the previous three months, the statistics office announced on Friday.
Preliminary data from the bureau had pointed to a 0.2% qoq drop, adjusted for price and calendar effects. In the third quarter of 2022, gross domestic product recorded slight growth of 0.5% compared to the three months before.
The second consecutive decline in the current valuation component of the Ifo, a falling manufacturing purchasing managers’ index, weak consumer confidence and sentiment to spend near historic lows all point to renewed contraction in the German economy in the first quarter, ING Global Head of Macro said Carsten Brzeski.
Worse-than-expected fourth quarter earnings are fueling fears of a winter recession. A recession is usually defined as two consecutive quarters of contraction.
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“Today’s figures show that the sharp increase in energy prices has slowed down the economy noticeably despite the government’s extensive aid measures,” said Commerzbank economist Ralph Solveen. With the global tightening of monetary policy, a noticeable economic recovery is unlikely, said Solveen.
After the expiry of relief measures such as the fuel discount and the 9-euro ticket, consumers spent less in the fourth quarter than in the third quarter, the statistical office announced. Household spending fell 1.0% while government spending increased 0.6% qoq.
According to the statistics office, investments also weighed on economic output. Construction investment fell 2.9% in the fourth quarter, while investment in machinery and equipment fell 3.6%, both adjusted for inflation, seasonal and calendar effects.
In the fourth quarter, exports of goods and services fell by 1.0% compared to the third quarter. According to the statistical office, the reason for this was the difficult international situation, which was characterized by ongoing disruptions in the supply chains and high energy prices.
Reporting by Maria Martinez, editing by Kirsti Knolle, Friederike Heine, Rachel More and Tomasz Janowski
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