Germany’s economy contracts, signaling a recession

Germany’s economy contracts unexpectedly in Q1 2023, signaling a potential recession.

Key figures: Data shows that Germany’s GDP declined by 0.3% from January to March, following a drop of 0.5% in the last quarter of 2022.
* Two consecutive quarters of contraction is a common definition of recession.

Economic context: High inflation and rising interest rates are impacting consumer spending and investment.
* Prices in April were 7.2% higher than a year ago.
* Despite employment rising in the first quarter, higher interest rates will continue to put pressure on spending.

Comparing economies: Germany has been the worst performer among major eurozone economies over the past two quarters.
* The eurozone economy as a whole achieved meager growth of 0.1% in Q1 2023.
* The International Monetary Fund predicted that the United Kingdom would avoid recession this year while Germany is performing worse.

Outlook: The German government may need to revise downward its growth forecast for this year, impacting the nation’s economic performance.
* Last month, the government doubled its growth forecast for this year to 0.4%, a figure that may now need to be adjusted.

View original article on NPR

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