The statistical institute had predicted stagnation, the German economy is finally in recession. Thursday, May 25, the Destatis institute revealed that the gross domestic product of the first European economy had fallen by 0.3% between January and March over one quarter. This decline follows a first contraction (− 0.5%) recorded between October and December 2022. This technical recession − that is to say two consecutive quarters of decline − is a first since the fall in GDP in the first and second quarters of 2020, during the health crisis.
The German economy seemed to hold up better than expected at the start of the year, with the effects of the energy crisis contained thanks to massive aid, increased use of liquefied gas and the start of a drop in gas prices. But inflation above 7% ultimately compressed private and public consumption spending considerably, which weighed on this dynamic, as did the successive key rate hikes led by the European Central Bank (ECB) since July 2022 to combat the inflation.
Result: after several months of increase, the production of the manufacturing sector, central to the German economic model, started to fall again in March, falling by 3.4% over one year. Industrial orders also fell sharply in March, by 10.7%, unheard of since the trough of the pandemic. And exports, essential for this sector, fell sharply, to 5.2%.
Despite this slowdown, the German government expects a gradual recovery in activity during the year, with growth of 0.4% in 2023.