Germany slips into recession as consumers in Europe’s largest economy spend less

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A shopping street in the German city of Stralsund

London
CNN
—

Germany has slipped into recession as last year’s energy price shock took its toll on consumer spending.

Official data showed Thursday that output in Europe’s biggest economy fell 0.3% in the first three months of the year after contracting 0.5% at the end of 2022.

The Federal Statistical Office has revised downwards its previous estimate of zero growth in gross domestic product compared to the previous quarter. A recession is defined as two consecutive quarters of declining production.

“The persistently high price increases also weighed on the German economy at the beginning of the year,” the office said. “This was particularly reflected in household consumption spending, which fell by 1.2% in the first quarter of 2023.”

Claus Vistesen, chief euro area economist at Pantheon Macroeconomics, said consumer spending was dampened in the first quarter by “the energy price shock”.

The recession may be short-lived, however, as latest PMI survey data earlier this week showed business activity in Germany picking up again in May despite a sharp contraction in manufacturing.

— This is an evolving story and will be updated.