Bundesbank: Technical Recession in Germany Not Excluded

19 February 2024

By Isabel Teles – FRANKFURT (Econostream) – The German economy contracted in the fourth quarter of 2023 and might shrink again in the first quarter of 2024, leading to a technical recession, the German Bundesbank said on Monday in its latest monthly report.

‘In the first quarter of 2024, the economic output could therefore decline again slightly. With the second consecutive decline in the economic output, the German economy would be in a technical recession’, the Bundesbank said.

However, ‘a recession in the sense of one significant, broad-based and prolonged decline in economic output still cannot be determined and is not currently expected’, the Bundesbank said.

Seasonally adjusted GPD fell by 0.3% compared to the previous quarters, when it almost stagnated due to factors such as elevated financing costs, weak foreign demand, and unfavourable weather conditions, which ‘will probably remain in the first quarter of 2024’, according to the report.

‘In addition, it cannot be ruled out that the various strikes, among other things, in the areas of rail and air transport, affect production’, the Bundesbank said.

Despite the weak economy, there were ‘no signs that the situation on the labour market will noticeably worsen’, the report said.

The disinflation process continued, and both headline and core inflation fell compared to the previous quarter, respectively from 5.7% to 3% and from 5.8% to 3.6%, according to the report.