Germany: Economy contracts by more than expected in Q4
GDP contracted 0.4% on a seasonally adjusted quarter-on-quarter basis in the final quarter, contrasting the 0.5% expansion tallied in the third quarter. Q4’s reading marked the worst result since Q1 2021 and was worse than the market had expected.
The downturn reflected contractions in private consumption, fixed investment and exports. Household spending worsened, contracting 1.0% seasonally adjusted quarter-on-quarter in Q4 from a 0.7% contraction in Q3. Public spending rebounded, growing 0.6% in Q4 (Q3: -1.2% s.a. qoq). Fixed investment plunged at the steepest rate in over two years, contracting 2.5% in the final quarter (Q3: +1.3% s.a. qoq).
On the external front, exports of goods and services plunged at the steepest rate in over two years, falling 1.0% in the fourth quarter (Q3: +1.9% s.a. qoq). In addition, imports of goods and services deteriorated, contracting 1.3% in Q4 (Q3: +2.1% s.a. qoq).
On an annual basis, economic growth waned markedly to 0.3% in Q4 from the previous quarter’s 1.3% increase. Q4’s reading marked the worst reading since Q1 2021.
Looking ahead, 19 of the 25 panelists polled by FocusEconomics expect the economy to contract again in Q1, resulting in a technical recession. Private consumption and investment will continue to contract, albeit at slower rates, while public spending growth will slow. That said, export activity will rebound.