Frankfurt, Germany: Germany teetered on the brink of recession Friday after official data showed the economy stagnated in the first quarter despite expectations for a slight rebound, as the energy crisis weighed on Europe’s top economy.
Gross domestic product came in flat from January to March, according to preliminary figures from federal statistics agency Destatis said.
If the economy had recorded a contraction again — after shrinking 0.5 percent in the final quarter of 2022 — it would have entered a “technical recession”.
However, the flat reading could still be revised to a contraction when final figures are released.
The industrial powerhouse, which had long been heavily reliant on Russian energy, was hit hard after Moscow’s invasion of Ukraine sent gas prices surging.
Analysts and the government predicted for months that soaring inflation, particularly of energy, would push the economy into a sharp winter downturn.
But expectations changed in recent weeks as Germany’s vast industrial sector rebounded, on the back of falling energy prices and the reopening of China, a key market for German manufacturers, after long Covid lockdowns.
While the economy appears to have avoided the worst, the first quarter reading was below expectations from analysts surveyed by financial data firm FactSet for an expansion of 0.2 percent.
According to Destatis, exports and investments helped to support GDP but household and government consumption declined.
The GDP data “illustrates that the industrial renaissance of the last two months has not been enough to get the economy out of recessionary territory,” said ING economist Carsten Brzeski.
“The overall direction for the German economy is clear: this year will bring a long flirtation with stagnation.”