The German economy has entered a recession. The largest European economy contracted for two quarters in a row. This is mainly due to households spending less money.
Inflation is responsible for the economic headwind in Germany, reports the German statistics agency Destatis. Despite the fact that annual inflation has slowed down, it was still 7.2 percent higher in April than a year earlier.
The wages of German employees did rise by 5.7 percent in the first quarter. Yet households spent less money.
Germans spent less money on food, drink, clothes, shoes and furniture. They also bought fewer cars, although this also has to do with the reduction in subsidies for electric cars. As a result, GDP contracted by 0.3 percent in the first quarter of 2023. The economy contracted by 0.5 percent in the previous quarter.
The number of construction investments, on the other hand, increased in the first quarter of 2023 and rose by 3.9 percent. This is due to the mild weather in Germany, according to Destatis. Foreign trade in plastics and metals also prospered.
Economists had already predicted the current contraction and do not expect a real economic crisis to come. Last year, the German economy grew by 1.9 percent, despite the high inflation in the country and the problems the Germans had in the energy supply.
If the gross domestic product (GDP) shrinks for two quarters in a row, a recession has occurred. When a recession lasts longer, companies can go bankrupt and unemployment rises. People have less to spend.
2023-05-25 07:20:26
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