MarketGerman economy grew unexpectedly

German economy grew unexpectedly

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Despite high inflation, the German economy is doing better than initially thought. In the third quarter, gross domestic product increased by 0.4 percent compared to the previous quarter.


Despite the headwinds in the summer, the economy gained momentum. As reported by the Federal Statistical Office, gross domestic product (GDP) increased by 0.4 percent in the third quarter from the previous quarter, thus increasing more than originally anticipated.

In the initial estimate, the Wiesbaden authority assumed a 0.3 percent price, seasonal and calendar adjusted increase in economic output.

Despite the ongoing corona epidemic, supply bottlenecks, rising prices and war in Ukraine, Europe’s largest economy, it grew as in the first two quarters of the year (plus 0.8 percent and plus 0.1 percent).

After the corona relaxation: more private consumer spending

The growth in the July-September period was mainly driven by private consumer spending. Despite high inflation and the energy crisis, consumers benefited from the lifting of almost all corona restrictions in the third quarter, for example, to travel and go out more, as Wiesbaden officials explained.

Companies have invested significantly more in equipment such as machinery. Construction investments, on the other hand, declined after adjusting for price, seasonal and calendar effects, as in the second quarter. High building prices and higher mortgage interest rates are weighing on business.

Economic output expected to decline

Many economists expect a cold winter in Europe’s largest economy in the first half of the year. They assume a decline in economic output, but do not expect an economic collapse as in the 2020 Corona crisis. At that time, the gross domestic product shrank by more than four percent for the year as a whole.

“Downfalls similar to those seen in the financial or corona crisis are only possible if there is gas shortage and thanks to full storage facilities and above all the significant savings efforts of companies and households. Fritzi Köhler-Geib, chief economist at KfW, recently said: Jörg Krämer, chief economist at Commerzbank He also referred to the federal government’s aid package:

I still expect a recession, but not any more economic collapse than usual.

Commerzbank Chief Economist Jörg Krämer

High inflation rates are a burden for consumers and companies

The persistently high inflation, which rose to 10.4 percent in October, is particularly worrying. High inflation rates burden companies and reduce the purchasing power of consumers.

People can afford less for a euro. This can reduce private consumption, which is an important pillar of the economy. At the same time, the weakening in the global economy is likely to put pressure on exports, according to economists.

OECD expects slower global economic growth in 2023

Global economic growth will slow next year due to Russia’s war of aggression in Ukraine, according to one forecast from the OECD, the organization of industrialized nations. Accordingly, global growth in 2023 should be only 2.2 percent. This is significantly less than expected before the war.

Higher inflation and lower growth are the heavy price the global economy has paid for Russia’s war in Ukraine.

OECD study

Thanks to growth in past quarters, the federal government finally expected a 1.4 percent increase in economic output for the full year 2022. As a result of the expected weak winter half year, a 0.4 percent decrease is expected in the gross domestic product for the coming year compared to the previous year.

Source: ZDF

Ben
Ben
I am Ben Stock, a highly experienced professional with over 7 years of experience in the news industry. I specialize in market section writing and have published numerous high-quality articles on various topics under my name. My passion for journalism has helped me to develop an in-depth understanding of the industry, enabling me to stay up-to-date on all the latest trends and developments.

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