By Ed Frankl
The German economy contracted in the third quarter by less than expected, after lower consumer spending was offset by improving investment, and revisions to previous quarters meant the economy avoided a recession reported last winter.
Germany’s gross domestic product shrank 0.1% from July to September compared with the previous quarter, adjusted for price, seasonal and calendar variations, according to preliminary data from the country’s statistics office released Monday.
The reading was slightly better than the 0.2% on-quarter contraction expected by economists in a poll by The Wall Street Journal.
Meanwhile, GDP was revised up in both the first and second quarters of this year. The economy grew 0.1% in the second quarter, a rise from the zero growth under previous data, and stagnated in the first, from a 0.1% contraction, meaning Germany avoided the recession previously reported. GDP contracted 0.4% on quarter in the final three months of 2022.
The economy was 0.3% smaller than the same month a year ago, again after price and calendar adjustments.
Household final consumption expenditure, in particular, was weaker in the quarter, Destatis said. But positive contributions to GDP came from investment in machinery and equipment, it added.
The adaptability of German companies, collective energy saving and government crisis management prevented a worse GDP reading, according to Fritzi Koehler-Geib, chief economist at KfW.
“Next year, thanks to declining inflation and rising incomes, the economy is likely to pick up again, primarily as a result of rising consumption,” she added.
However, the German economy continues to face a difficult path to sustained growth, hampered by a manufacturing sector that continues to be sluggish. The European Commission expects German GDP to shrink by 0.4% in 2023 as a whole, according to its latest forecasts published in September.
Write to Ed Frankl at edward.frankl@wsj.com
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