By Ed Frankl
Germany’s economy contracted in the final quarter of 2023, only narrowly missing a recession, hurt by low global demand and high inflation which continued to weigh on the country’s economy.
Germany’s gross domestic product shrank 0.3% from October to December compared with the previous quarter, adjusted for price, seasonal and calendar variations, according to preliminary data from the country’s statistics office released Tuesday.
This compares with flat growth in the third quarter, better than the originally reported decrease of 0.1%, meaning the economy marginally dodged a technical recession, typically defined as two straight quarters of declining GDP.
The fourth-quarter reading matched the decline signaled earlier in January by Destatis at the release of full-year GDP figures, which showed Europe’s largest economy contracted 0.1% in 2023, dragged by high inflation and tight financing conditions.
Compared with the third quarter, there was a marked decline in investment in construction and machinery, Destatis said, reflecting that European Central Bank’s high interest rates burdened the economy.
Money markets are pricing in a first rate cut in April, although the bank’s President Christine Lagarde commented at last week’s monetary-policy meeting that it would be premature for policymakers to discuss cuts.
Other signals for Germany’s economy also suggest economic woes look set to remain. The country’s leading economic-sentiment barometer, the Ifo index, declined further in January, with services providers in particular more gloomy about their future prospects.
The country is also in the throws of a series of public-sector strikes, including among farmers and public-transport workers, and its coalition government, already riven with disagreements, is having to deal with the aftermath of a constitutional court ruling that severely restricts its ability to invest.
However, Germany’s Bundesbank expects growth to slowly recover this year, forecasting the economy to expand 0.4% for 2024. GDP data for the eurozone as a whole for the final three months of 2023 will be published at 1000 GMT.
Write to Ed Frankl at edward.frankl@wsj.com
