Winter recession: Bundesbank warns: German economy continues to shrink

According to the Bundesbank, the German economy got off to a weak start in the new year.

Winter recession: Bundesbank warns: German economy continues to shrink

According to the Bundesbank, the German economy got off to a weak start in the new year. "Economic output is likely to be lower again in the first quarter of 2023 than in the previous quarter," writes the central bank in its monthly report, which was published on Monday. That would have slipped Germany into the winter recession: if gross domestic product (GDP) falls for two quarters in a row, economists speak of a technical recession.

The Bundesbank's economists state that the tension on the energy markets and the associated uncertainty have eased significantly. For example, the government electricity and gas price brakes mitigate the increase in energy costs for private households and companies. Investment and industrial production should benefit from this.

"On the other hand, after the significant decline in December 2022, industrial production started from a depressed level in 2023," explained the Bundesbank. "This also applies to exports, which are also being dampened by falling foreign demand." Private consumption is suffering from inflation, which is reducing household purchasing power. The construction industry is expected to cool down further.

view in the future

"Things could slowly pick up again as the year progresses," predicts the Bundesbank. "But there is still no sign of any significant improvement." All in all, according to the Bundesbank, German economic output should decline slightly on average in 2023, but do a little better than expected in December. In December, the Bundesbank had predicted a GDP decline of 0.5 percent for 2023.

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