German economy dives into recession in Q1

By Al Mayadeen English
Source: Agencies
25 May 2023 17:18
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Germany's GDP falls for the second time in a row in the fourth quarter of 2022 and the first quarter of 2023.

People carry bags on Hohe Strasse shopping street in Cologne, Germany. (Reuters)

The German economy has slipped into recession, dropping 0.2% year-on-year in the first quarter of 2023, as per official data.

Germany's gross domestic product (GDP) fell by 0.3% on a quarterly basis, according to the Federal Statistical Office (Destatis).

With these numbers, the country's GDP fell for the second time in a row in the fourth quarter of 2022 and the first quarter of 2023.

The head of ZEW Institute Achim Wambach warned last week that the German economy could dive into a recession, "albeit a mild one."

Earlier, the GfK research firm also cautioned that "it is more doubtful that the country (Germany) can avoid a recession."

Aside from GDP numbers, Germany's economic sentiment, retail sales, and manufacturing activity have all been pointing to a likely recession for some time.

"Furthermore, households purchased fewer new cars, which is likely attributable, in part, to the discontinuation of grants for plug-in hybrids and the reduction of grants for electric vehicles at the start of 2023," Destatis added.

A new report by the Financial Times (FT) highlighted, on Wednesday, that German exports to China had dropped by a double-digit reaching 11.3% and discussed the causes and concerns of this drop.

The FT report assessed the drop in German exports to China in the first four months of 2023, vis-a-vis numbers from exports of the first four months of 2022.

Several companies such as Volkswagen, Bosch, and BASF have reported losing market shares in China, chemical producers and other energy-intensive companies are reeling from high power prices, and the euro’s appreciation against the dollar has made German goods less competitive.

Significantly, the drop in exports has been among several economic indicators pointing toward Germany's manufacturing sector's sharp decline in 2023, the report claimed. FT explained that the decline included "lower factory output, plummeting demand, and a shrinking backlog of orders, which could slow growth in the EU’s largest economy."