Germany GDP shrinks yet again

The German economy, Europe’s biggest and the fourth largest in the world shrank unexpectedly in the first three months of this year.

This was the second consecutive quarter of contraction, which is one of the definitions of recession.

Data released Thursday by the Federal Statistical Office show that the GDP declined by 0.3 per cent in the period from January to March.

This follows a drop of 0.5 per cent during the last quarter of 2022. Two consecutive quarters of contraction is a common definition of recession, though economists on the euro area business cycle dating committee use a broader set of data, including employment figures.

“Germany has experienced a technical recession and has been by far the worst performer among major eurozone economies over the past two quarters,” said Franziska Palmas, senior Europe economist for Capital Economics, predicting further weakness ahead.

Employment in the country rose in the first quarter and inflation has eased, but higher interest rates will keep weighing on spending and investment, Palmas said.

The figures are a blow to the German government, which last month boldly doubled its growth forecast for this year after a feared winter energy crunch failed to materialise.

It said the economy would grow by 0.4 per cent — up from a 0.2 per cent expansion predicted in late January — a forecast that may now need to be revised downward.