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Germany narrowly escapes recession as economy flatlines, underperforming expectations

Germany avoided a recession by the skin of its teeth, underperforming expectations in the first quarter as its economy flatlined. (Pixabay /  Nikolaus Bader)
Germany avoided a recession by the skin of its teeth, underperforming expectations in the first quarter as its economy flatlined. (Pixabay / Nikolaus Bader)

Germany avoided a recession by the skin of its teeth, underperforming expectations in the first quarter as its economy flatlined.

There was no growth in the German economy during the first three months of the year, despite expectations of a 0.2% increase in GDP.

With the country’s GDP having declined by 0.4% in the last quarter of 2022, Germany escaped the technical definition of a recession — back-to-back quarters of economic decline — by the narrowest of margins.

The reading — a day after US GDP growth came in much weaker than expected — could increase fears of a global slowdown. However, investors may take confidence from elsewhere in Europe, as France and Italy both returned to growth.

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ING senior economist for France and Switzerland said that the French figures may not be a true source of optimism.

“All in all, the growth of the French GDP in the first quarter comes almost exclusively from supply chain normalisation, which allowed a strong growth of exports,” she said. “On the other hand, domestic demand is in decline.

“This does not bode well for the coming quarters. Indeed, business surveys indicate that the effect of supply chain improvements is fading and that sentiment among manufacturers remains quite negative for the coming months in line with the global economic slowdown. Exports are therefore likely to grow much more slowly in the coming quarters.

“At the same time, consumer confidence is not recovering and, unlike in other European countries, remains at a historically low level.”

The Euro Stoxx 50 is down 1% to 4314.

The UK economy flatlined in February after growing in January. March and first-quarter GDP figures will be published on 12 May.