Slump in Germany - economy shrinks in summer
The slump in consumption and the weakening global economy slowed down the German economy in the summer. Gross domestic product (GDP) fell by 0.1 percent in the third quarter compared to the previous quarter, adjusted for price, seasonal and calendar effects, according to the Federal Statistical Office in Wiesbaden. The authority thus confirmed an initial estimate.
Consumers continue to be burdened by comparatively high inflation. They can afford less for their money. Many people are cutting back on their consumer spending. The annual inflation rate was 3.8 percent in October after 4.5 percent in September and 6.1 percent in August. Food prices also rose at an above-average rate in October.
Headwind for the German economy
The German export industry is also feeling the effects of the weak global economy. Exports failed to drive growth in the summer. Overall, 0.8% fewer goods and services were exported than in the second quarter of 2023. The headwind is also coming from the rise in interest rates. These are depressing demand for construction services, among other things. According to the figures, positive impetus for the economy came from companies' investments in equipment, for example in vehicles and machinery.
According to the Bundesbank, the German economy will struggle to emerge from its weak phase, which has persisted since the start of the Russian war of aggression in Ukraine. Economic output is likely to fall slightly again in the fourth quarter of the current year. Economists and the German government expect Europe's largest economy to continue to shrink in 2023 as a whole before picking up again in 2024.
The high inflation rate is negatively impacting consumer spending, contributing to the economic situation of decreased consumer consumption in Germany. As a result, the GDP growth was negatively affected, with a 0.1% decrease in the third quarter compared to the previous quarter.
Despite the negative impact of inflation on consumer spending and the weakening global economy, the German economy is still expected to show some resilience. Positive impetus is expected from companies' investments in equipment, such as vehicles and machinery, to help offset the slowdown in GDP growth.
Source: www.dpa.com
