Brandenburg Gate in Berlin, Germany

Germany GDP Q2 2022

Germany: Economic growth flatlines in Q2

Preliminary national accounts data showed that the German economy stagnated in the second quarter, with quarter-on-quarter growth flatlining (Q1 2022: +0.8% qoq). On an annual basis, the economy expanded 1.5% in the second quarter, down from the 3.9% expansion logged in the first. Moreover, the economy has not yet returned to pre-pandemic levels, as GDP was still 0.2% below the fourth quarter of 2019—the last quarter before the onset of the pandemic.

While a detailed breakdown is scheduled to be released on 25 August, data point to a positive contribution from household and public consumption. On the other hand, the external sector is expected to have dragged on the economy. Lingering Covid-19 issues, the war in Ukraine and supply-chain snarls all impacted the economy.

Looking at the third quarter, the fading impact of the pandemic should provide some respite to the economy; however, the economic backdrop remains clouded by the war in Ukraine, elevated inflation, supply-chain issues, historically downbeat consumer sentiment and weakened business confidence. Moreover, the government’s fiscal relief package vis-à-vis energy prices will expire in August, implying greater price pressures in the tail end of the third quarter and thereafter.

Commenting on the outlook, Carsten Brzeski, global head of macro at ING, added:

“In the short run, the economy is facing a perfect storm. The economy avoided a contraction in the second quarter but looking into the remainder of the year, a recession looks almost unavoidable. In the longer run, the economy can only return as Europe’s powerhouse if it implements investment and structural change as determined and committed as it demanded from other eurozone countries in the past.”

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