Germany: GDP contracts in Q3
The economy contracted 0.1% on a seasonally adjusted quarter-on-quarter basis in Q3, contrasting the second quarter’s 0.1% increase. The drop was slightly less sharp than expected by the market but still the worst reading since Q4 2022.
On an annual basis, GDP contracted 0.8% in Q3, contrasting the previous period’s 0.4% expansion.
In its press release, the statistical office said that private spending was down compared to the prior quarter, while fixed investment in machinery and equipment contributed positively to economic growth. A more detailed breakdown will be released on 24 November.
Our panelists expect the economy to stagnate in Q4, putting it on the brink of recession. The trinity of high interest rates, lethargic external demand and high oil and gas prices continues to weigh on the economy.
Analysts at Fitch Solutions said:
“The latest figures included upward revisions to growth in both Q123 (from -0.1% q-o-q to 0.0%) and Q223 (from 0.0% to 0.1%) […]. Given the revisions, alongside our projection for the -0.1% Q323 contraction to be followed by an equal decline in Q423, we have raised our 2023 real GDP growth forecast from -0.3% to -0.1%. Meanwhile, we now forecast 2024 growth of 0.3% (down from 0.4%), based on expectations for more prolonged economic weakness.”
Analysts at EIU commented:
“The cut-off of Russian gas and subsequent decline in consumer and business confidence, along with monetary tightening, pushed the economy into recession in the winter of 2022/23. Growth will remain sluggish in the remainder of 2023, given still-high inflation, but accelerate from 2024. A poor demographic outlook will become a growing constraint.”