The German economy contracted slightly in the third quarter, data showed on Monday, as Europe’s largest economy continues to be hit by weak purchasing power and higher interest rates.
In adjusted terms gross domestic product fell 0.1 percent from the previous quarter, the Federal Statistical Office reported.
A Reuters poll predicted the economy would contract by 0.3%.
“These data alone underline that the German economy has become, at the very least, one of the laggards to eurozone growth,” said Carsten Brzeski, global head of macroeconomics at ING.
Looking ahead, the continued pass-through of the European Central Bank’s monetary policy tightening, failure to reverse the corporate inventory cycle and new geopolitical uncertainties will continue to weigh on the German economy, Brzeski said.
“The German economy looks set to remain in the twilight zone between a small contraction and stagnation, not only this year but also next,” Brzeski said.
The contraction in the third quarter is not seen as an exception, as Commerzbank expects the German economy to contract again in the winter half-year.
“Consumption is unlikely to recover as optimists expected,” said Joerg Kraemer, chief economist at Commerzbank.
Household consumption fell in the third quarter as high inflation continued to erode consumers’ purchasing power. Higher-than-expected inflation is seen as a major risk by central bankers, as it could extend the monetary tightening campaign, keeping interest rates higher for longer.
Source: Terra
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