Germany Enters Recession as Consumer Spending Tumbles
The Facts
Germany’s economy has underperformed forecasts, shrinking by 0.3% in the first quarter of 2023 after contracting by 0.5% in the final three months of 2022. These two consecutive periods of contraction mean Europe's largest economy has entered a recession.
Germany’s Federal Statistical Office initially predicted that the economy would narrowly avoid a technical recession with gross domestic product (GDP) stagnating in the quarter. However, unrelenting inflation caused increased prices and a resulting decrease in consumer spending.
The Spin
Narrative A
Germany’s economy is collapsing and, while some German bankers and bureaucrats may try to project confidence in a swift recovery, there's no evidence to suggest that Germany’s economic outlook will improve. German leaders have shown they have no idea how to tackle inflation, and unfortunately, consumers will be bearing the burden of high prices for the foreseeable future.
Narrative B
While it's disappointing to see that Germany’s economy has met the technical definition of a recession, there's no reason to panic. Investments continue to grow, and the European Central Bank will continue its fight against inflation. Poor GDP growth is definitely not a positive, but it’s not the primary concern as Berlin looks to lower prices and increase consumer spending — these actions will bring the entire economy back to normal.
