May 25, 2023 14:50 UTC
  •  Germany enters recession as GDP falls for consecutive quarters

Germany has officially entered a recession as its gross domestic product (GDP) declined for two consecutive quarters, according to figures released on Thursday by the Federal Statistical Office (Destatis).

Destatis reported that the country's output in the first quarter decreased by 0.3% compared to the previous three months, following a 0.5% decrease between October and December. This contradicted Destatis' initial estimate of stagnation or 0% growth, which was released last month.

The persistently high inflation in Europe's largest economy has led to reduced spending by Germans, explained the statistics office. Official data indicates that the consumer price index stood at 8.7% in January and February, slightly dropping to 7.2% in April. This inflation rate remains well above the central bank's medium-term target of 2%.

Destatis attributes the elevated inflation rate to the significant growth in energy and food prices since the onset of the conflict in Ukraine. These sectors have become the primary contributors to Germany's inflation.

"The reluctance of households to buy was apparent in a variety of areas: households spent less on food and beverages, clothing and footwear, and on furnishings in the first quarter of 2023 than in the previous quarter," the release stated.

Despite the economic impact of Western sanctions on Russia, Chancellor Olaf Scholz had previously ruled out the possibility of a recession in January. In an interview with Bloomberg TV, he expressed his confidence that Germany could respond effectively to challenging situations.

In terms of economic development, Germany lagged behind other major EU member states and the overall EU in the first quarter of this year. The EU as a whole registered growth of 0.2% between January and March.

The country's central bank, the Bundesbank, stated on Wednesday that it anticipates modest economic growth in the current quarter. This forecast is based on a rebound in the industry due to a backlog of orders and lower energy costs, which are expected to offset the stagnation in household consumption.