FRANKFURT, Germany : Data released this week showed that the German economy unexpectedly shrank in the fourth quarter of 2022, indicating that Europe's largest economy could be entering a recession, though less severe than originally predicted.
The federal statistics office said that adjusted gross domestic product GDP decreased by 0.2 percent quarter-on-quarter in adjusted terms, while the German economy grew by 0.5 percent compared to the previous three months.
A recession, defined as two successive quarters of contraction, has become more likely.
The winter months are turning out to be difficult, although not quite as difficult as originally anticipated. VP Bank chief economist Thomas Gitzel said that the German economy's severe crash remains in place, but a slight recession is still in the cards.
The German Economy Minister Robert Habeck said in his annual report last week that the economic crisis caused by Russia's invasion of Ukraine was manageable, but the government is cautious due to high energy prices and interest rate increases.
The government said the economic situation should improve from spring onwards, after revising its GDP forecast for 2023 by predicting growth of 0.2 percent, up from a forecast in autumn of a 0.4 percent fall.
This week's figures showed that private consumption was the main reason behind the decrease in fourth-quarter GDP.
According to Reuters, consumers are not immune to the erosion of purchasing power due to record high inflation, according to Commerzbank chief economist Joerg Kraemer.