German Economy Shrank 2 Times More Than Expected

Germany’s economy shrank more than expected by 0.4% at the end of 2022 due to a decline in capital investment and private consumption, according to data from the statistics office. The previous estimate for production was a contraction of 0.2%. While public spending had a positive impact, economists predict negative growth for the current quarter, which could lead to a recession if realized.

However, the milder winter weather in Germany has helped the country avoid more pessimistic scenarios that could have resulted from Russia’s invasion of Ukraine. Recent indicators, such as the Ifo and ZEW expectation indexes, suggest optimism about the resilience of the German economy. Similarly, surveys of purchasing managers indicate a return to growth through easing supply chain issues and expansion in the service sector, after more than six months of negative data for private sector activity.

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