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German economy contracted in fourth quarter, recession on the cards in first quarter From Reuters


©Reuters. FILE PHOTO: The sun sets behind the skyline and the European Central Bank (ECB, R) during a warm autumn evening in Frankfurt, Germany, October 1, 2023. REUTERS/Kai Pfaffenbach/File Photo

By Rachel More

BERLIN (Reuters) – The German economy contracted in the final three months of 2023, the statistics office said on Tuesday, with economists predicting Europe’s largest economy will enter another technical recession in the first quarter of 2024.

According to a Reuters survey, gross domestic product contracted 0.3% in the fourth quarter compared to the previous quarter, in line with analysts’ expectations.

The German economy contracted by 0.3% over the past year, due to persistent inflation, high energy prices and weak foreign demand.

However, as GDP remained stagnant in the second and third quarters, the euro zone’s largest economy was able to avoid another technical recession, commonly defined as two successive quarters of contraction.

This is expected to be short-lived, with the Ifo institute on Tuesday forecasting a 0.2% decline in GDP in the first quarter of 2024.

“Private consumption, which the optimists are counting on, disappointed until the end,” said Commerzbank (ETR:) economist Joerg Kraemer.

“The recent decline in industrial production and the low level of the Ifo economic sentiment indicate that the German economy also contracted in the first quarter,” he added.

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