Looks Like Germany Was In A Recession After All

Looks Like Germany Was In A Recession After All
Daniel Johnston

6 months ago2 mins

What’s going on here?

Data out on Thursday showed that Germany, the industrial titan of Europe, belly-flopped into a recession last quarter.

What does this mean?

Germany’s economy shrank by 0.5% in the last quarter of 2022, so when reports for the first quarter of this year showed zero growth, economists heaved a sigh of relief. See, stagnation isn’t pretty, but it’s better than the true bogeyman – a “technical recession”, when an economy shrinks for two straight quarters. But there’s been a plot twist: revised figures just revealed a 0.3% contraction in the first quarter of this year. Cue the dramatic music – because that means Germany’s in its first recession since the pandemic.

Germany GDP
Source: MarketWatch

The main culprit was household consumption, with spending on everything from food to finery taking a nosedive as consumers tightened their belts. But even in other areas, the writing was on the wall: after all, indicators for the all-important manufacturing sector have been flashing red for some time now.

Why should I care?

The bigger picture: The worst is yet to come.

This isn’t just a short-term hiccup for Germany. The country’s firms are already catching a chill, with business confidence slipping for the first time in seven months in May – and the IMF’s tipped Germany to emerge as the worst-performing big economy this year. With a series of rate hikes on the horizon too, households and businesses are set for an even tighter squeeze. That’s bad news for the eurozone: as the biggest economy in the bloc sinks, the rest of the crew could be dragged down with it.

Germany lags

Zooming out: Misery will have company.

The US is expected to join the recession club by the second half of the year – with the debt limit debacle only adding to its woes. See, that situation’s essentially a lose-lose: a prolonged political standoff would hurt the economy, but any deal will probably come with spending cuts that’ll do serious economic damage too.



All the daily investing news and insights you need in one subscription.

Learn More

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG