German Economy Enters Technical Recession in Q1 2023
The German economy contracted by 0.3% in the first quarter of 2023, according to final data recently released by the federal Department of Statistics. This contraction marks the second consecutive negative quarter for the German economy, plunging it into a technical recession. Inflation is cited as the main factor affecting consumption. Although inflation has started to decline, standing at 7.2% year-on-year in April, it is still higher than pre-pandemic levels.
However, the economy received a boost from exports and investment, along with the recovery in the construction and industrial equipment sector, as well as machinery, household appliances, and automobiles production. Detailed data from the Department of Statistics show an overall increase of 0.4% in exports but a 0.9% decrease in imports, where fuels, minerals, and chemical products experienced the biggest decline.
Despite economic contraction, labor employment rose to 45.6 million people in the workforce, representing a 1.0% YoY increase. The data confirm the trend of those corresponding to the Federal Employment Agency, highlighting a growing rate of employment despite challenges faced by the economy.
This is the first time Germany has experienced such a contraction since the coronavirus pandemic, which had caused a drop in GDP in the first and second quarters of 2020, affecting businesses not just in Germany but across the globe.