Economic power was better in the summer quarter than the federal government had expected in its autumn projection, as a spokesman for the Federal Ministry of Economics explained. The statistics showed the strong resilience of the German economy against the background of the war in Ukraine and the energy crisis. “Many supply contracts for Russian oil, gas and coal could be converted.”
Domestic consumption was decisive for the growth. Despite inflation and the widening energy crisis, consumers took advantage of the lifting of almost all corona restrictions in the third quarter, for example to travel more and go out, the statisticians explained. Overall, private consumer spending was one percent higher than in the second quarter. Government consumer spending, on the other hand, remained at the level of the previous quarter.
First happy reactions
The chief economist at VP Bank, Thomas Gitzel, was very surprised and outspoken: “Wow, now there’s even GDP growth of 0.4 percent! The details of German GDP are surprising across the board. Private consumer spending is plummeting 1.0 percent compared to the previous quarter. The corona catch-up effects after the lifting of almost all restrictions brought the service sector a whopping increase in sales.”
Jörg Zeuner from Union Investment points to the federal government’s measures and attests that they have a beneficial effect: “Consumer sentiment in Germany is stabilizing. The risk of energy shortages and the associated rationing has decreased. The government relief packages that have been announced should also have a positive effect have had.”
Slight imbalance in the trade balance
Trade with foreign countries increased despite the tense international situation, as the statisticians explained. Thanks to a continued high order backlog and better functioning global supply chains, 2.0 percent more goods and services were exported in the third quarter than in the previous quarter, adjusted for price, seasonal and calendar effects. Imports increased slightly more, at 2.4 percent.
The statisticians also called the development in the manufacturing industry “surprisingly positive”: Mainly due to increases in production in the automotive industry and in mechanical engineering, economic output grew by 0.9 percent from July to September compared to the previous quarter. The gross value added grew “particularly dynamically” in the areas of trade, transport and hospitality as well as public service providers, education and health.
The construction industry is weakening because many projects have been put on hold due to drastically increased costs.
The construction weakens
However, current economic data continued to signal a recession in the winter half-year. “The prerequisite for a mild recession is that there is no acute gas shortage, that there are no difficult corona developments and that the supply chains continue to gradually stabilize.”
In addition, the planned brakes on gas and electricity prices would have a positive effect “because they specifically relieve consumers of their down payments for electricity and gas/heat,” it said.
However, Thomas Gitzel thinks it is foreseeable that the construction industry will not contribute to growth: “Construction investments, on the other hand, will fall by 1.4 percent, which is not surprising, however, because the construction industry is already suffering from higher interest rates and high construction costs for new buildings.”
No reason for pessimism
When asked about their expectations for the winter and the coming quarters, the economists reacted cautiously. The chief strategist at Merck Finck, Robert Greil, says: “After the warm summer and the mild autumn, the German economy is faced with an economically cold winter. I still expect a recession. If there is no harsh winter in terms of temperature, it is more likely come to a mild rather than a deep recession.”
Jörg Zeuner also thinks euphoria is inappropriate: “Consumers are not yet feeling many of the burdens. The cold weeks of the heating season are still to come. Households are also likely to be faced with further increases in advance payments in the near future. The stricter credit conditions as well Impact of monetary policy noticeable.
But he doesn’t see any reason for pessimism either: “The bottom line is that economic output will decline by 1.5 percent over the winter half-year. The good thing, however, is that it shouldn’t get any worse.”
dk/hb (dpa, rtr, afp)