Germany exits recession, but outlook looks gloomy
Germany's economy flatlined in the second quarter of 2023, according to new data released on Friday which was unrevised from preliminary estimates.
The country's statistics office confirmed earlier data that showed that gross domestic product failed to expand between April and June, a slight improvement after two consecutive quarters of contraction – a technical recession. The data was in line with economists' predictions.
GDP declined by 0.1% and 0.4% in the first quarter of 2023 and fourth quarter of 2022, respectively.
"The question remains whether technically speaking a stagnation after two quarters of contraction is actually the end of a technical recession or a prolongation," said ING's global head of macro, Carsten Brzeski.
On a year-on-year basis, GDP declined by 0.2% after a 0.5% contraction in the first quarter.
"What is new in today’s data are the GDP components. While private consumption stagnated and public consumption increased marginally (+0.1% quarter-on-quarter), net exports were a drag on growth. The positive growth contribution from inventories reflects the ongoing inventory build-up, which doesn't bode well for the coming quarters," said Brzeski.
Looking ahead, the pause in GDP contraction is only expected to be temporary, with economists at Pantheon Macroeconomics expecting a 0.2% decline in the third quarter before a rebound of +0.4% in the fourth quarter.
"GDP this year will fall by 0.2%, after rising by 1.9% last year. If our forecasts for the rest of the big four EZ economies are correct, this means Germany will be the worst performing among them," said Melanie Debono, Pantheon's senior Europe economist.