German economy slips into recession as first-quarter GDP data revised lower
- Data from the German statistical office on Thursday showed a downward adjustment of GDP from zero to -0.3% for the first three months of the year.
- Germany also recorded a decrease of 0.5% in the last quarter of 2022.
Before sunrise, the residential buildings and office towers of the banking metropolis of Frankfurt are reflected in the quietly flowing river Main.
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The German economy entered a technical recession in the first quarter of this year, as households tightened spending.
Data from the German statistical office on Thursday showed a downward adjustment of GDP (gross domestic product) from zero to -0.3% for the first three months of the year.
This comes after Germany registered a 0.5% decline in the last quarter of 2022. Two consecutive quarters of negative growth defines a technical recession.
Europe’s largest economy has been under significant pressure, particularly in the wake of Russia’s invasion of Ukraine and the subsequent decision by European leaders to cut ties with Moscow.
According to the statistics office, German households spent much less in the first quarter, with consumer spending falling by 1.2% over the period, as consumers were reluctant to spend their money on clothes, furniture, cars and so on.
“Germany slipped into recession at the end of last year as the energy price shock weighed on consumer spending,” Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note to clients.
He added that it is unlikely that German GDP will continue to fall in the coming quarters, “but we do not see a strong recovery either.”
The latest economic developments are taking place against a backdrop of high inflation and high interest rates across the region. The European Central Bank is expected to raise interest rates again at its next meeting on 15 June. The central bank has raised interest rates by 375 basis points since July.
German central bank governor Joachim Nagel said earlier this week that the ECB has “several” more rate hikes ahead of it. He is one of the most hawkish members of the central bank.