Before sunrise, the residential buildings and office towers of the banking capital of Frankfurt are reflected in the quietly flowing river Main.
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The German economy entered a technical recession in the first quarter of this year as households tightened spending.
Data from Germany’s statistics office on Thursday showed a downward revision of GDP (gross domestic product) from zero to -0.3% in the first three months of the year.
This comes after Germany saw a 0.5% drop in the last quarter of 2022. Two consecutive quarters of negative growth define a technical recession.
Europe’s largest economy has been under considerable pressure, particularly as a result of Russia’s invasion of Ukraine and the subsequent decision by European leaders to cut ties with Moscow.
According to the statistics office, German households spent much less in the first quarter, with final consumption expenditure falling 1.2% over the period as consumers were reluctant to spend their money on clothes, furniture, cars and so on.
“After all, Germany slipped into recession at the end of last year as the energy price shock hit consumer spending,” Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note to clients.
He added that German GDP is unlikely to continue to decline in the coming quarters, “but we also don’t see any strong recovery.”
The latest economic developments are taking place against a backdrop of high inflation and high interest rates across the region. The European Central Bank is expected to raise rates again at its next meeting on June 15. The central bank has raised its rates by 375 basis points since July.
German central bank governor Joachim Nagel said earlier this week that the ECB had “several” more rate hikes ahead. He is one of the most hawkish members of the central bank.
