The cargo ship FA is seen on the river Main, ahead of the skyline, on a summer evening in Frankfurt, Germany, August 13, 2023. REUTERS/Kai Pfaffenbach
BERLIN – Germany’s economy stagnated in the second quarter compared with the previous three months, showing no signs of recovering from the winter recession and cementing its position as one of the world’s weakest major economies.
The zero growth figure for the second quarter was in line with an initial estimate released in late July. Year on year, adjusted GDP contracted 0.2 percent in the second quarter.
On a quarterly basis, economic activity fell 0.4 percent in the fourth quarter of 2022 and 0.1 percent in the first quarter of 2023. Two consecutive quarters of contraction meet the technical definition of a recession.
“The short and long-term outlook for Germany looks anything but rosy,” said Carsten Brzeski, global macro head at ING.
Weak purchasing power, dwindling industrial order books, a slowing Chinese economy and the impact of the most aggressive monetary tightening in decades all point to weak economic activity in Germany in the future, said said Brzeski.
Household consumption showed flat growth in the second quarter compared to the first and government spending rose 0.1 percent. Capital investment also rose modestly while exports fell 1.1%, data showed on Friday.
Pantheon Macronomics expects GDP to contract 0.2 percent in the third quarter, before rebounding 0.4 percent quarter on quarter in the final quarter of the year. This would mean that German GDP would fall by 0.2% year on year in 2023.
“If our forecast for the rest of the big four eurozone economies is correct, that means Germany will be the worst performer of them,” said Melanie Debono, senior economist for Europe at Pantheon Macronomics.
The Bundesbank expects economic output to remain largely unchanged in the third quarter, according to a monthly report released on Monday.
A resilient labor market, strong wage increases and lower inflation are expected to boost private consumption, but industrial production will remain weak due to weak foreign demand, the report said.
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