The residential and office buildings of Frankfurt’s banking metropolis are reflected within the calmly flowing river Important before sunrise.
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The German economy entered a technical recession in the primary quarter of this 12 months as households reduce on spending.
Thursday’s data from the German statistical office showed a downward revision of GDP (Gross Domestic Product) from zero to -0.3% for the primary three months of the 12 months.
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This comes after Germany recorded a 0.5% contraction within the last quarter of 2022. Two consecutive quarters of negative growth mark a technical recession.
Europe’s largest economy is under considerable pressure, especially within the aftermath of Russia’s invasion of Ukraine and the following decision by European leaders to sever ties with Moscow.
German households spent significantly less in the primary quarter, in accordance with the statistical office, with consumer spending falling by 1.2% over the period as consumers were reluctant to spend money on clothing, furniture, cars, etc.
“Germany actually fell into recession late last 12 months as the energy price shock took a toll on consumer spending,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, in a note to clients.
He added that it was unlikely that German GDP would proceed to fall in the approaching quarters, “but we do not see a powerful recovery either.”
Franziska Palmas, Senior Economist for Europe at Capital Economics, said: “We expect further weakness.”
Recent economic development is happening against a backdrop of high inflation and high rates of interest across the region. The European Central Bank is predicted to lift rates of interest again at its next meeting on June 15. Since July, the central bank has raised rates of interest by 375 basis points.
German central bank governor Joachim Nagel said earlier this week that the ECB had “just a few more” rate of interest hikes ahead of it. He’s one of the hawkish members of the central bank.
“Higher rates of interest will proceed to weigh on each consumption and investment, and exports might also suffer from economic weakness in other developed markets. Our forecast is for further declines within the third and fourth quarters,” added Palmas of Capital Economics.
The 10-year German Bund modified hands at around 2.46% within the early hours of trading in Europe.