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German economy stagnates in second quarter

August 25, 2023

Germany has emerged from recession, but is still in a phase of weakness. From April to June, it recorded zero growth compared to the previous quarter.

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Hundreds of containers are stored at the container terminal in Hamburg
Exports, which are important for the German economy, fell slightly in the second quarter of 2023Image: Andreas Rentz/Getty Images

The German economy stagnated in the second quarter of 2023, the country's Federal Statistical Office (Destatis) said on Friday. 

However, despite showing no growth, Germany has officially emerged from the recession it entered after the economy contracted for two straight quarters. 

Figures released by Destatis show that Europe's largest economy saw zero growth from April to June compared to the previous quarter.

In the fourth quarter of 2022, economic output fell by 0.4% and in the first quarter of 2023 by 0.1% compared to the respective previous quarters.

"After slight declines in the previous two quarters, the German economy stabilized in spring," Destatis president Ruth Brand said.

Consumption and investment rise slightly

The economy was supported by improved consumption and rising investment. After two consecutive declines, consumer spending increased slightly by 0.1% in the second quarter of 2023 compared to the first quarter of 2023.

After the positive development in the previous quarter, investments also rose in the second quarter of 2023. For example, 0.6% more was invested in equipment (machinery and cars) compared to the previous quarter.

According to Destatis, however, exports, which are important for German GDP, fell slightly (-1.6%) compared to the previous quarter. During the same period, imports fell even more, at -1.8%.

How sick is Germany's economy?

Will stagnation continue?

Compared to other major Western economies, only Italy posted worse results (-0.3%) than Germany in the second quarter. According to Destatis, the US recorded growth of 0.6%, France 0.5% and the Eurozone as a whole 0.3%.

Earlier this week, the German Bundesbank predicted that Germany's "lackluster" economy would continue to stagnate in the third quarter. It is "still experiencing a period of weakness", the bank said in its monthly report.

And the IMF has forecast that Germany will be the only major advanced economy to shrink this year.

The annual inflation rate in Germany slowed to 6.2% in July, mainly due to falling energy prices, but is still well above the 2%  target set by the European Central Bank.

dh/rc (AFP, Destatis)

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