Economy Federal Statistical Office
Germany’s economy stagnates in the second quarter
Status: 28.07.2023 | Reading time: 2 minutes
The German economy has ended its recession – but it has not grown
Source: dpa/Stefan Puchner
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So far these are only preliminary figures, but the trend does not look particularly good: the gross domestic product is stagnating and the prospects for the coming months have clouded over. “The situation in the German economy is getting darker,” comments Ifo President Clemens Fuest.
The German economy is stuck in the doldrums. After the frosty economic winter, the hoped-for spring upswing failed to materialize. The gross domestic product (GDP) stagnated in the second quarter compared to the previous quarter after price, seasonal and calendar adjustments, as the Federal Statistical Office in Wiesbaden announced on Friday based on preliminary figures. According to economists, the prospects for the coming months have also clouded over.
In the winter half-year, the German economy slipped into a so-called technical, i.e. short-term, recession with two negative quarters in a row. An important reason for this was the high inflation, which above all dampened the willingness of private households to spend and weighed on the economy accordingly. According to preliminary data from the statisticians, consumer spending by private households stabilized in the second quarter after the weak winter half-year.
According to economists, there are increasing signs of a weak second half of 2023. The mood in the German economy deteriorated again in July. The Ifo business climate index fell for the third time in a row. “The situation in the German economy is getting darker,” commented Ifo President Clemens Fuest.
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According to DZ Bank economics expert Christoph Swonke, the German economy is being dampened by higher interest rates and persistently high inflation. Added to this is the restrained demand from abroad.
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Economic research institutes and many bank economists expect that Europe’s largest economy will shrink slightly over the year as a whole. The Deutsche Bundesbank expects economic output to fall by 0.3 percent. The International Monetary Fund (IMF) also recently predicted a drop of 0.3 percent.
The gross domestic product (GDP) indicates how well or badly a country’s economy is developing. Everything that is produced in a certain period of time is included. The value of services is also included, as are consumer spending and company investments – for example in machines. All economic sectors are taken into account. The largest item is private consumption. Another component is the so-called external contribution – i.e. the difference between what companies sell abroad (exports) and buy from there (imports).
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