Germany’s economy experienced zero growth in the second quarter of 2023, continuing its stagnation from the winter recession and solidifying its position as one of the weakest major economies in the world. This figure aligns with the initial estimate released in July, and when compared to the same period last year, the adjusted GDP contracted by 0.2%. The consecutive quarters of contraction meet the technical definition of a recession.
Carsten Brzeski, global head of macro at ING, expressed a pessimistic outlook for Germany’s economy in both the short-term and long-term. Weak purchasing power, reduced industrial orders, a slowdown in the Chinese economy, and the impact of a highly aggressive monetary policy tightening all contribute to the expectation of continued weak economic activity in Germany.
The data revealed that household consumption remained stagnant in the second quarter, while government spending increased by 0.1%. Capital investment showed modest growth, but exports experienced a 1.1% decline. Considering these factors, Pantheon Macroeconomics predicts that Germany’s GDP will contract by 0.2% in the third quarter before rebounding with a 0.4% growth in the fourth quarter. This would result in a 0.2% decline in Germany’s GDP for the year 2023.
Melanie Debono, senior Europe economist at Pantheon Macroeconomics, stated that if their forecasts for the other major eurozone economies are accurate, Germany will be the worst-performing among them. The Bundesbank’s monthly report suggested that economic output would mostly remain unchanged in the third quarter. While the resilient labor market, wage increases, and declining inflation may boost private consumption, industrial production is expected to remain weak due to sluggish foreign demand.