Data from Germany’s federal statistical office showed on Thursday that the country’s economy contracted slightly in the first quarter of 2023 compared with the previous three months, entering a recession.
The data showed that GDP fell 0.3 percent when adjusted to take into account the effects of prices and the calendar. This follows a 0.5% decline in the fourth quarter of 2022.
The Statistics Office said inflation remained a drag on Germany’s economy at the beginning of the year. This was reflected in household consumption, which fell 1.2% on a quarterly basis after adjustments based on price, seasonal factors and calendar.
In contrast to that trend, investment increased in the first three months of the year after weakening in the second half of 2022. Trade has also made positive contributions.
Germany’s economy appeared to be more robust than expected at the beginning of the year with the effects of the energy crisis contained by enormous aid, the use of increasingly liquefied gas and the start of lower gas prices. But inflation, which is still very high at 7%, ultimately significantly reduced private and public consumer spending.