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German Economy Shrinks On Weak Investment

The German economy contracted at the end of the year on weaker investment, revised data from Destatis showed on Friday.

Gross domestic product slid 0.3 percent sequentially in the three months to December after stagnating in the third quarter.

The statistical office confirmed the preliminary estimate published on January 30.

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Data showed that household spending gained 0.2 percent and government consumption moved up 0.3 percent.

Meanwhile, gross fixed capital formation slid 1.9 percent.

Capital formation in construction posted a 1.7 percent decline, which come on the heels of the declines already registered in the two previous quarters.

The fall in gross fixed capital formation in machinery and equipment eased 3.5 percent.

Exports decreased 1.6 percent. At the same time, the decline in imports was somewhat larger, at -1.7 percent.

Subdued foreign demand, ongoing geopolitical tensions as well as high energy prices contributed the weakness in trade in goods, Destatis said.

Calendar-adjusted GDP dropped 0.2 percent year-on-year, as estimated, following a 0.3 percent decrease in the third quarter.

Price-adjusted GDP slid 0.4 percent annually, slower than the 0.7 percent contraction in the preceding period. The price-adjusted rate also matched the flash estimate.

“The German economy ended 2023 in negative territory,” President of the Federal Statistical Office Ruth Brand said.

“In the final quarter, declining investment had a dampening effect on economic activity, while consumption increased slightly,” Brand added.

Early this month, the Bundesbank said in its monthly report that the German economy likely entered a recession in the first quarter but the trend will not be long-lasting.

Last month, the ifo Institute said that the economic output is set to shrink in the first quarter by 0.2 percent amid a decline in demand across the board.

For the whole year of 2023, GDP decreased 0.3 percent, in line with initial estimate.

The government downgraded its growth projection for this year to 0.2 percent from 1.3 percent.

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