Germany suffered its first recession since the start of pandemic, extinguishing hopes that Europe’s top economy could escape such a fate after the war in Ukraine sent energy prices soaring.
First-quarter output shrank 0.3% from the previous three months following a 0.5% drop between October and December, the statistics office said Thursday. Its initial estimate, last month, was for stagnation.
“The reluctance of households to buy was apparent in a variety of areas,” the office said in a statement. “Households spent less on food and beverages, clothing and footwear, and on furnishings.” They also purchased fewer electric cars as incentives were reduced.
Elsewhere, there was a plunge in government expenditure, while investment was up —aided by construction in unseasonably warm weather.
The result is a setback for Germany, which despite escaping the bleakest scenarios feared in the aftermath of Russia’s invasion has nevertheless succumbed to a recession that Chancellor Olaf Scholz appeared to rule out in January.
Markets shrugged off Thursday’s numbers — despite their implications for the wider performance of the 20-nation euro zone.