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German economy stagnates in Q2 after winter recession

Cargo ship on river Main in Frankfurt

A cargo ship is seen on river Main in front of the skyline during a summer evening in Frankfurt, Germany, August 13, 2023. REUTERS/Kai Pfaffenbach Acquire Licensing Rights

BERLIN, Aug 25 (Reuters) – The German economy stagnated in the second quarter compared to the previous three months, following a winter recession, data from the statistics office showed on Friday.

The figure of zero growth for the three months to July was in line with a first estimate published in late July. Year on year, adjusted GDP contracted by 0.2% in the second quarter.

Quarter on quarter, economic activity had fallen by 0.4% in the fourth quarter of 2022 and by 0.1% in the first quarter of 2023. Two consecutive quarters of contraction commonly define a recession.

Household consumption showed zero growth in the second quarter from the first and government spending rose by 0.1%. Capital investment also grew modestly while exports fell 1.1%, Friday’s report showed.

The Bundesbank expects economic output to remain largely unchanged again in the third quarter, according to a monthly report published on Monday.

A resilient labour market, strong wage increases and declining inflation should boost private consumption, but industrial production will remain weak due to sluggish foreign demand, the report said.

Reporting by Maria Martinez, Editing by Friederike Heine and John Stonestreet

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