Germany’s Economic Slowdown: Insights from Q3 2023
24 Nov 2023
In the third quarter, Germany’s economy slightly declines.
Germany’s economy contracted marginally in the third quarter when compared to the preceding three months, as indicated by data from its statistical office on Friday.
The data corroborated an initial estimate, released in late October, which reported a 0.1% contraction in the economy of Europe’s largest economy.
Ruth Brand, the president of the statistics office, remarked, “Following the subdued economic growth observed in the first half of 2023, the German economy commenced the second half of the year with a modest decline in performance.”
This year, Germany has been one of the least robust economies in Europe, facing challenges from elevated energy expenses, diminished global orders, and increased interest rates.
During the second quarter, Germany’s economy expanded by 0.1% following a period of stagnation in the initial three months of the year.
In the third quarter, the adjusted gross domestic product (GDP) registered a year-on-year contraction of 0.4%.
Private consumer spending, constituting approximately two-thirds of GDP, declined by 0.3% compared to the previous quarter, according to the statistics office. Additionally, government consumer spending recorded a 0.2% increase, marking the first rise in over a year.
A court decision, preventing the reallocation of untapped funds from pandemic relief to green investments and resulting in a 60-billion-euro ($65.44 billion) deficit in the government’s budget, has created significant uncertainty. This is especially notable in the industrial sector, impacting planned investments.
VP Bank Chief Economist Thomas Gitzel remarked, “The implementation of government austerity measures may further hinder growth,” and he added that it is improbable for private consumption or investment to experience a sudden upturn.
In its monthly economic report on Monday, the Bundesbank stated that the German economy is expected to contract once more in the fourth quarter but may display indications of marginal improvement in the early part of next year.