Germany Enters Recession

Posted on 05/25/2023

The German economy has been considered the engine of Europe, but new data shows there may be cause for concern. The economy contracted 0.3% in Q1 2023. It contracted 0.5% in Q4 2022.

The Leibniz Institute for Economic Research at the University of Munich also has new data that reveals German exports are struggling. The Institute rates expectations on a numerical scale. Sentiment in the German export industry fell to +1.8 points in May, down from  +6.5 points in April. This is the lowest level since November 2022. Klaus Wohlrabe, Head of Surveys, says: “Global interest rate hikes are slowly having an effect on demand. The German export economy lacks momentum.”

Car companies have slowed their export plans. Following recent expectations of significant growth, businesses are now forecasting a decline. According to the Institute: “Manufacturers in the metal and textiles industries also expect their international sales to fall. In the chemical industry and among manufacturers of electrical equipment, positive and negative outlooks are more or less balanced. By contrast, manufacturers of data processing equipment are optimistic about the development of their international business, as are clothing manufacturers.”

Federal statistics agency Destatis says inflation is impacting Germany: “The persistence of high price increases continued to be a burden.” Germany famously suffered hyperinflation during the Weimar Republic, paving the way for the carnage to come leading up to and including World War II.

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