Germany’s economy on the brink of recession

GERMANY is on the brink of recession as manufacturing and property crises engulf the eurozone’s biggest economy.

The German economy shrank by 0.3pc in the final quarter of 2023, according to the Federal Statistical Office. It follows six months of flat output, meaning Germany has not grown since the first quarter of 2023.

The economy shrank 0.3pc in 2023. Activity declined after Germany was cut off from cheap Russian energy and demand from China waned. The housing market is in trouble. Property prices are falling and developers are cancelling projects, prompting a downturn in the construction industry. Train strikes raise the prospect of a formal recession.

Carsten Brzeski, economist at ING, said: “With an average quarterly growth rate of 0pc since the second quarter of 2022, the economy is anything but fast growing,” he said. “It is a shallow recession. In fact, the economy remains stuck in the twilight zone between recession and stagnation.”

Elsewhere, the French economy continues to flatline, recording a second consecutive quarter of no growth. Retail sales and hospitality struggled. With farmers laying siege to Paris, France may struggle to ease the downturn. By contrast, growth in Spain and Italy accelerated in the final months of 2023 up 0.6pc and 0.2pc respectively.

These peripheral performances helped the eurozone only just avoid recession. It recorded no growth in the fourth quarter, according to Eurostat, after a 0.1pc contraction in the previous three-month period.

The International Monetary Fund slashed its forecasts for Germany’s growth this year, predicting GDP will expand by 0.5pc over 2024 – a cut from the 0.9pc predicted in October.

France is expected to grow by 1pc, down 0.3 percentage points on earlier predictions, while the eurozone as a whole will grow 0.9pc, down from the 1.2pc forecast three months ago.