Several news outlets declare that the German economy is in a recession. According to Axios,
Germany’s economy, the world’s fourth-largest, is officially in a recession—a major blow for the European Union and a warning for the global economy.
They rely on the Federal Statistical Office the official German statistics agency, which explains that German gross domestic product, GDP,
fell by 0.3% in the first quarter of 2023 on [sic] the fourth quarter of 2022 after adjustment for price, seasonal and calendar variations. … “After GDP growth entered negative territory at the end of 2022, the German economy has now recorded two consecutive negative quarters,.” says Ruth Brand, President of the Federal Statistical Office.
Axios blames the recession on “painfully high inflation and the most aggressive monetary tightening cycle in decades.” Austrian Kleine Zeitung, citing the same GDP numbers, points to reduced spending by inflation-plagued consumers.
In a comment on the GDP numbers, Alice Weidel, a leading representative of AfD in the German Bundestag, points to “high inflation and artificially higher energy prices” which burden middle-class households. It is not surprising that consumer spending is falling, says Weidel, when Germans are also burdened by “confiscatory” changes to property and inheritance taxes. She concludes by pointing finger to the “green policy of de-industrialization.”
The GDP numbers cited in the news show the change in inflation-adjusted economic activity from the last quarter of 2022 to the first quarter of 2023. According to the Federal Statistics Office, the same quarter-to-quarter change from the third to the fourth quarter in 2022 also was also negative. Since the commonly accepted definition of a recession is negative GDP growth in two consecutive quarters, the Office declares the German economy in recession.
It is common to see a decline in economic activity in the first quarter of a year, as consumer spending, business hirings, and capital formation activities come off the holiday spending season of the preceding year. This is a trend visible in multiple countries, and not limited to Europe. To avoid the influence of such seasonal variations, statistical agencies also publish data on year-to-year GDP fluctuations.
According to the Federal Statistical Office, from the first quarter in 2022 to the first quarter this year the German economy fell by 0.2%. This number is confirmed by Eurostat, the official statistics agency of the European Union.
However, according to year-to-year GDP numbers from Eurostat, while the German economy declined by 0.17% in the first quarter this year, it expanded by 0.23% in the fourth quarter of 2022. Based on these numbers, it is inaccurate to declare the German economy in recession.
Based on these Eurostat numbers, Estonia and Lithuania are the only EU member states that can be declared in recession.
