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A BMW factory was spotted in Munich in December 2023. Germany's struggling manufacturing sector is a drag on economic growth.
According to Germany's Federal Statistical Office (Destatis), GDP in 2023 was 0.3% lower than the previous year.
“Overall economic growth stagnates in an environment marked by multiple crises in Germany in 2023,” Testatis president Ruth Brandt said in a statement. Report.
Although inflation has declined, prices remain high across the economy and have created a drag on the economy Development, he added. “Rising interest rates and weak domestic and foreign demand also took their toll.”
Gross domestic product fell 0.3% compared to the fourth quarter In the previous quarter, according to the Bureau of Statistics' preliminary estimate. That followed a period of stagnation in the three months to the end of September, meaning Germany narrowly avoided a recession in the second half of the year, defined as two consecutive quarters of falling GDP.
The data is poor for the entire euro area, as Germany is the largest of its 20 economies.
A survey released Monday by the World Economic Forum agrees Annual meeting In Davos, Switzerland, more than three-quarters are economists Expect “weak or very weak growth” in Europe in 2024.
More than half of all economists surveyed between November and December expect the global economy to weaken this year.
“The survey highlights the precarious nature of the current economic environment,” said WEF Executive Director Sadia Zahidi.
The euro area is an example: output there contracted slightly in the third quarter of 2023. Final quarter figures, expected on January 30, will confirm whether the region has slipped into recession by the end of the year.
The decline in German GDP reflects weakness across the economy, but particularly in the country's broader manufacturing sector, which has been hit by Chinese demand, higher energy costs and painful interest rate hikes.
Within that sector, car manufacturing and production of other transportation equipment posted growth last year, but output in the energy-intensive chemical and metals industries fell. Overall, industrial production, which dominates manufacturing, shrank by 2%, Destatis said. Exports fell by 1.8%.
Household and government spending also fell, the latter for the first time in nearly 20 years. “This is primarily due to the suspension of government-funded Covid-19 measures, such as compensation to hospitals for vaccinations and free beds,” Testatis said.
Europe's biggest economy is off to a bumpy start this year, after finishing 2023 backwards, with the three-day national Rail strike Higher wages and working hours caused travel chaos last week. The disruption was intensified by farmers blocking highways and other roads to protest government plans to cut fuel subsidies.
Farmers gathered together in an organized rally for a final demonstration in Berlin on Monday With the German trucking industry.
Government expenditure will be reduced This year will weigh on Germany's economic growth, according to Andrew Cunningham, chief European economist at Capital Economics.
“It appears that the lingering recessionary conditions will continue into late 2022,” he wrote in a note on Monday. “We forecast GDP growth to be zero in 2024.”
A silver lining in German economic data is employment, which grew by a record 0.7% or 333,000 people compared to 2022. 45.9 million. According to Destatis, foreign workers and domestic workers who joined the labor force were left behind Increase. This “more than offsets the mitigating effects” of Germany's aging population, the statistics office said.
Stephanie Halas contributed reporting.