The world’s fourth-largest economy, Germany, falls into recession as consumers spend less on food and clothing.
According to figures released on Thursday, Germany’s economy shrank somewhat in the initial quarter of 2023 compared to the prior three months, officially entering a technical recession.
According to an early assessment, Germany’s gross domestic product (GPD) would have just avoided entering a recession in the first quarter, stagnating at zero growth. But after data released earlier this month revealed that German industrial output declined more than anticipated in March, hampered by a dismal performance by the crucial car sector, recession fears were rekindled.
According to figures from the Federal Statistical Office, Destatis, after accounting for price and seasonal impacts, GDP decreased by 0.3% for the quarter.
Destatis President Ruth Brand said, “After GDP growth entered negative territory at the end of 2022, the German economy has now recorded two consecutive negative quarters.”The data for January to March come after a 0.5% decline in the fourth quarter of 2022.
The German economy continues to suffer during the quarter, according to the office. After accounting for price and seasonal changes, household consumption decreased by 1.2% from one quarter to the next.
Compared to the prior quarter, individual households spent less on furniture, clothing, shoes, food, and beverages. Additionally, they purchased fewer brand-new vehicles, presumably as a result of the expiration of government subsidies towards the close of 2022. Additionally, falling off in the preceding three months of the year was government spending
Germany, which relies heavily on Russian energy supplies, was left, especially vulnerable as a result of the Russian attack of Ukraine in the month of February 2022.
The worst-case scenarios, like a petrol scarcity, which would have devastated the economy, weren’t happening in Germany due to a mild winter. The COVID-19 epidemic in the beginning of 2020 forced governments to essentially shut down entire areas of the economy, which led to Germany’s most recent recession.
High inflation has eroded the purchasing power of consumers, which has decreased demand in the economy. Despite a recent easing in the increasing pricing trend, April’s yearly inflation rate of 7.2% was still relatively high.
