Germany: The German economy contracted by 0.3% in 2023, it’s now official

2023 is officially a bad year for Germany . It is now not just a sensation, but a reality confirmed by the economic data and above all by the GDP trend.

The German economy contracted by 0.3% in 2023, following a downwardly revised 1.8% expansion in 2022, in line with market expectations.

Stubbornly high inflation throughout the year, combined with rising interest rates, dampened activity and demand both domestically and abroad. The economic output of the industrial sector fell by 2% , due to the significant decline in production in the energy supply sector. Additionally, manufacturing production fell 0.4 percent due to sharp declines in the automotive industry and the construction of other vehicles. Evidently the electric revolution is not good for Germany.

Construction activity increased by 0.2%, marking a recovery after two years of sharp contraction, despite continuing high construction costs, a shortage of skilled labor and increasingly difficult financing conditions, but the effects of the increases interest rates have probably not yet been fully produced.

Finally, growth in the services sector has cooled, with all major sectors slowing down, including information and communications (2.6% versus 5.0%), business services ( 0.3% versus 2.6%) and public services (1.0% versus 2.7%).

Here is the graph over a ten year horizon:

Let's look at the data over a 25-year horizon

The fall in GDP has occurred, in 25 years, only in a few cases:

• Covid;
• the great financial crisis;
• the German economic crisis before the reforms of the early 2000s

Now we are at a new crisis, both in terms of causes and evolution. While both the great financial crisis and the Covid one were moments of crisis linked to external factors, we are now faced with a problem due precisely to internal dynamics, to the fact that well-being and growth are no longer the objective of the government that , instead, it has bowed to external goals, from "Climate Control" to the change in political positioning after many years of close collaboration with Russia. Getting out of this crisis will be much more complex, because it would risk a political change of which, so far, there is no official sign. Then voters can always force a change of direction.

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The article Germany: German economy contracted by 0.3% in 2023, it's now official comes from Economic Scenarios .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/germania-leconomia-tedesca-si-e-contratta-dello-03-nel-2023-ora-e-ufficiale/ on Mon, 15 Jan 2024 11:00:00 +0000.