Germany’s economy on brink of recession

Germany is on the brink of recession after the economy contracted more than expected at the end of last year.

Gross domestic product growth fell by 0.4 percent in the last three months of 2022.

A recession is the contraction of the economy for two consecutive quarters, or six months. It can affect income and employment.

The figures were a downward revision of the initial estimate of a 0.2 percent drop by Destatis, the official statistics office.

It also marks the second downward revision of Germany’s latest GDP figures in the past month.

And the fourth-quarter growth numbers are the worst since early 2021, when the country was in the depths of Covid lockdowns.

The outlook contrasts sharply with the UK, which narrowly avoided a recession late last year, with the latest figures showing gross domestic product remaining unchanged between the third and fourth quarters of 2022.

Germany’s Federal Statistics Office said the dip was caused by stunted consumer spending and investment in buildings and machinery rocked by record high inflation.

Investment bank Nomura said: “The underlying picture is one of weak domestic demand, with both household consumption and capital investment falling in the quarter more than many had expected.”

The German economy has traditionally relied on Russian energy and export demand from China, which has been undermined by the pandemic and the ongoing war in Ukraine.