Economic news

German Economy Stagnates in Q2, Outlook Remains Clouded

  • Germany is the worst-performer among major euro-zone economies
  • Household consumption stabilised in 2Q
  • German economy expected to remain stuck in the mud

BERLIN, July 28 (Reuters) - The German economy stagnated in the second quarter of 2023, missing forecasts for modest growth, as weak purchasing power, higher interest rates and low factory order books all weighed on the euro zone's largest economy.

According to the federal statistics office, there was no quarter-on-quarter change in gross domestic product in seasonally adjusted terms. A Reuters poll of analysts had forecast an increase of 0.1%, after the economy fell into a mild recession in winter.

Germany remained the worst-performing major euro zone economy in the second quarter, while the French and Spanish economies grew at a sustained pace on the back of stronger exports and tourism, statistics agencies said on Friday.

One positive note was the stabilisation of German household consumption in the second quarter after the weak winter half-year, according to the statistics office.

"There are indeed slightly positive trends in private consumption and investment, but that is not enough, and the figures are anything but satisfactory," German Economy Minister Robert Habeck said on Friday.

But Habeck rejected calls for an economic stimulus package. "Whoever distributes money with a watering can in times of high inflation only brings one thing to growth: inflation."

Germany will publish inflation data at 1200 GMT on Friday. Economists polled by Reuters expect a continuation of the downward trend, with headline inflation falling to 6.2% in July from 6.4% in the previous month.

"We continue to see the German economy being stuck in the twilight zone between stagnation and recession," said Carsten Brzeski, global head of macro at ING.

Weak purchasing power, thinned-out industrial order books, the impact of the most aggressive monetary policy tightening in decades, and the expected slowdown of the U.S. economy, all argue in favour of weak economic activity, Brzeski said.

The German statistics office also revised the figures for the previous quarters to a 0.1% GDP decline in the first quarter from a prior estimate of a 0.3% drop and a 0.4% contraction in the last quarter of 2022, revised from a decline of 0.5%.

"The German economy will remain stuck in the mud for the foreseeable future," said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

Reporting by Maria Martinez and Miranda Murray; editing by Matthias Williams and Sharon Singleton

Source: Reuters

To leave a comment you must or Join us

More news

Back to economic news list

By visiting our website and services, you agree to the conditions of use of cookies. Learn more
I agree