Germany's economy unexpectedly shrank 0.2% in the fourth quarter of 2022, heightening the prospects of a recession in Europe this year.
Germany’s gross domestic product (GDP) contracted in the fourth quarter of 2022 for the first time since the first quarter of 2021 largely due to a decline in consumer spending, said the country’s Federal Statistical Office.
Previously, the German economy had grown 0.5% in the third quarter of 2022 and 0.1% in the second quarter of last year.
Germany’s annual inflation rate declined to an annualized 8.6% in December from a peak of 10.4% in October. However, high consumer prices remain an issue for Europe’s largest economy.
A potential energy crisis in Germany following Russia’s invasion of Ukraine has also been a worry. But Germany’s energy regulator said recently that a natural gas shortage this winter is “increasingly unlikely.”
Most economists say that Europe will be unlikely to avoid a recession this year if Germany’s economy falters.
A recession is typically defined as two consecutive quarters of economic contraction.
