Germany’s economy shrinks slightly in third quarter

Germany’s economy shrank slightly in the third quarter compared with the previous three months, data from its statistics office showed on Friday.

The figure confirmed an initial estimate, published in late October, that saw Europe’s largest economy shrink by 0.1%.

“After the weak economic development seen in the first half of 2023, the German economy began the second half of the year with a slight drop in performance,” said Ruth Brand, president of the statistics office.

Germany has been among the weakest economies in Europe this year as high energy costs, weak global orders and higher interest rates have taken their toll.

In the second quarter, Germany’s economy had grown by 0.1% after stagnating in the first three months of the year.

Adjusted gross domestic product (GDP) contracted by 0.4% year-on-year in the third quarter.

Private consumer spending, which accounts for about two-thirds of GDP, was 0.3% lower than in the previous quarter, the statistics office said. Government consumer spending increased for the first time in more than a year by 0.2%, it added.

A court ruling that blocked the transfer of unused funds from the pandemic to green investment and blew a 60 billion euro ($65.44 billion) hole in the government’s budget has led to major uncertainty, particularly among industry, about planned investments.

“Government austerity measures could lead to an additional dampening of growth,” said VP Bank Chief Economist Thomas Gitzel, adding “it is unlikely that private consumption or investment will suddenly pick up.”

The Bundesbank said in its monthly economic report on Monday that the German economy will likely shrink again in the fourth quarter and show signs of slight improvement early next year.

($1 = 0.9168 euros)