Germany fell into a recession around the turn of the year, official figures published Thursday showed, as inflation and higher interest rates curbed demand in Europe’s largest economy.

Over the first three months of 2023, the economy shrank by 0.3 per cent, the federal statistics agency Destatis said, downgrading an initial estimate of zero per cent.

Following a 0.5-per cent contraction in the last three months of 2022, it was Germany’s second consecutive quarter of negative growth – the threshold for a “technical recession”.

The slump came as Germany battled a surge in energy prices in the wake of the Russian invasion of Ukraine, which has weighed on households and businesses.

The increased cost of energy has driven inflation, which sat at 7.2 per cent in Germany in April, down only slightly from its peak towards the end of 2022.

“The persistence of high price increases continued to be a burden on the German economy at the start of the year,” Destatis said in a statement.

The impact was felt particularly by consumers who reined in their spending on items such as food and clothing.

The negative revision to the growth figure was no surprise following a string of weak economic indicators, LBBW bank analyst Jens-Oliver Niklasch said.

“The early indicators suggest that things will continue to be similarly weak in the second quarter” of 2023, Niklasch said.

Industrial orders, which give a foretaste of factory output, plummeted in March when compared with the same month last year.


‘Danger zone’

Germany, which had long been heavily reliant on Russian energy imports, was left particularly exposed following the Russian invasion in February last year.

The curtailment of gas supplies in particular left Berlin scrambling to find new sources of energy and fill reserves ahead of what was anticipated to be a harsh winter at the end of 2022.

The slump was “not the worst-case scenario of a severe recession” predicted by some following the Russian invasion, said Carsten Brzeski, head of macro at the ING bank.

But mild temperatures, a rebound in key market China and the easing of supply chain problems following the coronavirus pandemic were “not enough to get the economy out of the recessionary danger zone”, Brzeski said.

“A drop in purchasing power, thinned-out industrial order books as well as the impact of the most aggressive monetary policy tightening in decades” were likely to drag on the economy further, he said, referring to the European Central Bank’s interest rate hikes against inflation.

An anticipated slowdown in the US economy and the continuation of the war in Ukraine would also weigh on output, he said.

The figures will trouble policymakers in Berlin who in April raised their forecast for economic growth in 2023 to 0.4 per cent, amid early year optimism.

German Chancellor Olaf Scholz had previously signalled confidence that Germany had done enough to fend off a painful economic contraction.

Germany’s last recession came as the coronavirus pandemic swept through Europe at the start of 2020, prompting governments to effectively shut down large swathes of the economy.

God1000:
Some people will mock Germany for its stance on Russia's illegal war in Ukraine

But I'm sure they fully prepared for this, that's the price for freedom

9jatriot:
If you look at the body language of the Germans and their response in the early days, you will know that German is not really into the war. They are just doing it because of solidarity. No sensible world leader believed first that Russia will really attack Ukraine even though the threat was there, and worse off, nobody in his right senses thought that Zenlensky will really want to go head to head with Russia in 2022 when the whole of developed nations are avoiding wars all

This war has set Europe back many years, but they have no choice, they have to keep supporting Ukraine though.

OloyeVIII:
Just print more money! FFS

savcy:


They would just slip into a depression. Because the cost of goods would skyrocket to high heavens.

God1000:
Yeah I remember the visit of German chancellor to Moscow days before Putin invaded Ukraine.

He extended an olive branch to Mr Putin but it didn't work out, several European leaders also traveled to Russia then.

They are just trying to avoid the repeat of world war II, Putin's Imperial ambition must be stopped in Ukraine

savcy:


What many do not know is that the Ukraine war actually halted a huge plan the EU had to get itself off US influence, and that plan involved integrating Russia into EU affairs. NATO would probably have been disbanded in 10 years time, because EU powers were already getting weary and were questioning it'sFrance, especially was advocating a military and economic body that would be absolutely independent of US influence.

God1000:
Lol, how do you integrate Russia into EU affairs?

Europe isn't strong enough to protect itself, they need US protection.

OloyeVIII:

All these inflation, deflation, oppression, depression bvllshit. I don't understand sh!t, who the fvck invented the economy?

savcy:


A potential Russian integration was indeed tricky, but it was achievable. Russia in collaboration with the rest of the EU can protect the EU.

savcy:


You call what you don't understand BS. Wow!

God1000:
You are funny man, my first time of reading something like this.

savcy:


What many do not know is that the Ukraine war actually halted a huge plan the EU had to get itself off US influence, and that plan involved integrating Russia into EU affairs. NATO would probably have been disbanded in 10 years time, because EU powers were already getting weary of it and questioning it's continued existence. This war granted legitimacy to NATO, a development which saddens Germany, Hungary, France and Belgium, because they had a plan to create a military organisation that would protect EU interests solely. EU isn't really happy about how the war is progressing. They all want an end to it, either militarily or by negotiations. But they want it to happen now. They're weary of it and just want it to end. The EU still and will always see Russia as a brother.

savcy:


What many do not know is that the Ukraine war actually halted a huge plan the EU had to get itself off US influence, and that plan involved integrating Russia into EU affairs. NATO would probably have been disbanded in 10 years time, because EU powers were already getting weary of it and questioning it's continued existence. This war granted legitimacy to NATO, a development which saddens Germany, Hungary, France and Belgium, because they had a plan to create a military organisation that would protect EU interests solely. EU isn't really happy about how the war is progressing. They all want an end to it, either militarily or by negotiations. But they want it to happen now. They're weary of it and just want it to end. The EU still and will always see Russia as a brother.

God1000:
Some people will mock Germany for its stance on Russia's illegal war in Ukraine

But I'm sure they fully prepared for this, that's the price of freedom, Freedom comes at a cost

9jatriot:
While I agree that Europe was beginning to want to reduce their dependency on the US especially during the time of Trump, I do not think they would want to integrate Russia directly into mainstream. Maybe they would have found a way to live with Russia more as a strategic partner than direct integration.

Something tells me that they all think Zenlensky is being foolish but telling him so will mean Russia has won. They just expect him to use his common sense to assess if joining NATO is worth all the death and devastation. I want to believe that they are wondering like what sensible leader watches his infrastructure and people being killed and is still eager to continue the carnage

Leaders that do not mind senseless killings going on are usually found in Africa and Middle East

Antiochus:


No it's the price of foolishness for being a US vassal. Had they prepared for this it would not have hit them. They wanted to bring Hungary into their foolish suicidal mission but the Hungary President used his head and refused to be a vassal.

savcy:


The only country that prepared for this is Russia. Others didn't. Look at the moves Russia has been making in the last one year. I won't call them fantastic, but, damn! Making in-roads in Africa and Asia... Their economy will feel the impact of the respective sanctions, but even that is yet to be seen. The whole world instead is in a strait due to the war. If there wasn't a Ministry of Information controlling MSM, we'd have known the true picture of the economic crisis that's engulfed the world due to this war.

savcy:
The early optimistic forecasts show that the Germans do not have total control of proceedings as things unfold in the aftermath of the Ukraine conflict. Europe's largest economy slipping into a recession is huge problem for the bloc. By the time they crawl out of this recession to compete again, China would have more than filled their vacuum. I mean, obviously the problem is more dire than is in the news.

Energy problems are very fundamental, and since Russian cheap energy is history, they might as well accept their new reality. Because, unless oil prices ease up, no seller would decrease the price of energy to them on benevolent grounds for them. Other countries in the EU would soon declare their economic health, and the world would understand how this war in Ukraine has potential changed

world order. Funny thing is, the US probably wins it all. They're the only country in the world who can solve their problems by printing currency notes.

God1000:
Yeah I remember the visit of German chancellor to Moscow days before Putin invaded Ukraine.

He extended an olive branch to Mr Putin but it didn't work out, several European leaders also traveled to Russia then.

They are just trying to avoid the repeat of world war II, Putin's Imperial ambition must be stopped in Ukraine