The German economy experienced a decline in its gross domestic product (GDP) during the first quarter of 2023, according to the latest report by the Federal Statistical Office (Destatis). The GDP fell by 0.3% compared to the previous quarter, after adjusting for price, seasonal, and calendar variations. This represents a 0.3 percentage point decrease from the initial release on April 28, 2023. Ruth Brand, President of the Federal Statistical Office, noted that this decline marks two consecutive negative quarters for the German economy, following the negative growth at the end of 2022.
The decline in economic performance can be attributed to several factors. Household final consumption expenditure dropped by 1.2% in the first quarter of 2023 after adjusting for price, seasonal, and calendar effects. Households spent less on food and beverages, clothing and footwear, and furnishings compared to the previous quarter. Additionally, the reduction in grants for electric vehicles and plug-in hybrids contributed to fewer purchases of new cars by households. Government final consumption expenditure also decreased significantly by 4.9% compared to the previous quarter.
However, investment showed a positive trend, with gross fixed capital formation in construction increasing by 3.9% after adjusting for price, seasonal, and calendar variations. This growth was supported by favorable weather conditions during the first quarter. Gross fixed capital formation in machinery and equipment also saw a significant increase of 3.2% at the beginning of the year.
Foreign trade provided a positive contribution to the German economy, as exports of goods and services increased by 0.4% compared to the fourth quarter of 2022, after adjusting for price, seasonal, and calendar effects. Notably, trade in plastics and fabricated metal products showed robust growth. However, total imports decreased by 0.9%, primarily due to reduced imports of mineral fuels, chemicals, and chemical products.
In terms of sectors, the construction industry experienced the highest growth in gross value added, with a 6.1% increase compared to the previous quarter. Manufacturing also showed promising growth, with a quarter-on-quarter increase of 2.0% after adjusting for price, seasonal, and calendar effects. However, economic performance in the services sector was overall weaker than in the industry.
When compared to the first quarter of 2022, Germany’s GDP in the first quarter of 2023 decreased by 0.2% after adjusting for price effects. After considering both price and calendar adjustments, the decrease amounted to 0.5%, mainly due to the presence of one additional working day compared to the same quarter of the previous year.
Despite the economic challenges, employment in Germany continued to increase, with approximately 45.6 million people employed in the country during the first quarter of 2023. This represents a year-on-year increase of 446,000 individuals or 1.0%.
While Germany’s economic performance in the first quarter of 2023 lagged behind other large European Union (EU) member states, such as Spain, Italy, and France, which reported slight growth, it fared better than the United States, which experienced a 0.3% increase in GDP during the same period.
The Federal Statistical Office also revised the GDP data for all four quarters of 2022 based on additional statistical information. As a result, the GDP change rate for the first quarter of 2023 was downwardly revised by 0.3 percentage points after adjusting for price, seasonal, and calendar effects.