Germany Falls Into Recession As Consumers In Europe’s Biggest Economy Spend Less  

• Germany has slipped into recession as last year’s energy price shock takes its toll on consumer spending. Output in Europe’s largest economy dropped 0.3% in the first three months of the year, following a 0.5% contraction at the end of 2022, official data showed Thursday.
• “The persistence of high price increases continued to be a burden on the German economy at the start of the year,” the office said. “This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023.”
• Claus Vistesen, chief euro-area economist at Pantheon Macroeconomics, said spending by consumers in the first quarter was crimped by “the shock in energy prices.” European energy prices were already rising when Russia’s invasion of Ukraine in February last year sent them soaring to record highs. Moscow then went on to throttle gas supplies to European countries, prompting Germany to declare an emergency.
• In a sign that Germany’s recession may prove short-lived, timelier survey data showed earlier this week that business activity in the country expanded again in May, despite a sharp downturn in manufacturing. German Chancellor Olaf Scholz described the outlook for the economy as “very good,” pointing to measures his government has taken in recent months to expand renewable energy production and attract foreign workers.
• However, Franziska Palmas, senior Europe economist at Capital Economics, forecast that German output would shrink again in the third and fourth quarters. The German economy is expected to shrink by 0.1% in 2023, according to the latest forecast from the International Monetary Fund.

 (Source: CNN Business)