Small Contraction for German Economy in Fourth Quarter

The German economy contracted slightly in the last quarter of 2022. In the fourth quarter, the largest economy in the eurozone had to contend with, among other things, a decline in consumer spending after three-quarters of growth.

This was reported by the German statistics agency Destatis based on a new estimate.

At the publication of the economic growth figure for the whole of 2022, which was published earlier this month, Destatis said it was counting on the stagnation of the economy in the fourth quarter. Compared to the third quarter, however, the economy of the important trading partner of the Netherlands contracted by 0.2 percent. Compared to the same period a year earlier, there was a growth of 1.1 percent.

Therefore, a recession in Germany is possible again if the economy also shows a contraction in the first quarter. Last week, the German government came up with a new forecast for 2023, counting on small economic growth this year. Last autumn, the government was still counting on a contraction of the German economy in 2023.

In addition to Germany, Sweden also showed an unexpected contraction in the last quarter of 2022. In addition, inflation in Spain unexpectedly rose to 5.8 percent in January, while it had been expected to cool down to 5 percent. The economic outlook for Europe, therefore, remains uncertain.

The European Central Bank has indicated its determination to reduce inflation in the euro area. On Thursday, the ECB is expected to raise interest rates again by half a percentage point to counter price increases. However, the higher borrowing costs are also putting the brakes on the economy, and the full impact of the previous interest rate hikes is yet to come.

Leave a Reply