2023-07-28 11:31:00
Germany sinks into depression. In the second quarter, the largest economy in the European Union disappointed by stagnating, with now the threat of posting an annual recession. Its Gross Domestic Product (GDP) posted zero growth between April and June, following declining successively by 0.4% and 0.1% in the previous two quarters, according to revised data and adjusted for seasonal and calendar variables. (CVS) published on Friday. Analysts polled by Factset were expecting a rebound of 0.3%.
Private household consumption expenditure “stabilized in the second quarter of 2023 following the weak winter semester”detailed the statistics office Destatis, just enough to compensate for a manufacturing industry that is still brooding.
In contrast, two other major European countries are smiling. Growth in France reached 0.5% in the second quarter, much more than expected, driven by exports which compensated for household consumption at half mast, INSEE announced on Friday.
France posts 0.5% growth in the second quarter driven by its exports
“For the first time, French growth is driven much more by exports than by consumption”reacted the Minister of Economy and Finance Bruno Le Maire on RTL.
On the other side of the Pyrenees, Spain saw its growth slow down slightly in the second quarter (+0.4%), but remains supported by consumption, according to the National Institute of Statistics (INE). A first estimate of growth for the euro zone will be published on Monday by Eurostat.
Germany, weak link with high inflation
Germany, whose economic model is closely dependent on exports, is currently leaning timidly on its household consumption, helped by a solid labor market, rising wages and a downward trend in inflation. But the latter only fell slightly in July, to 6.2% over one year, or 0.2 percentage points less than the figure for June (+6.4%), indicated in a press release. the Destatis Institute. A much less marked drop than in France where inflation reached 4.3% in July or in Spain (2.3%).
As a result, the industry, like a chemical industry in crisis, is slipping, although the difficulties in the supply chains have been reduced and it has benefited from a large order book. “If chemicals and autos weaken together, it will trigger a real industrial recession”warns the economist Sebastian Dullien, of the IMK institute, quoted by the daily Süddeutsche Zeitung.
“Germany remains the weak link” in Europe, summarizes Capital Economics. Although German GDP has left behind the technical recession experienced this winter, with two quarters in a row in decline, the respite might however only be short-lived. The downturn in July’s Purchasing Managers’ Index (PMI) pointed to a further drop in GDP in Q3, barring a trend reversal in August and September. The German economy might also end the year in the red overall, at the back of the pack of euro zone countries. The main economic institutes are now expecting a decline estimated between 0.2 and 0.4%, the IMF for its part expecting -0.3%. Olaf Scholz’s government still sees GDP growth posting 0.4%, but this April forecast has a good chance of being revised downwards in the fall.
Even worse off than Germany, Austria saw its GDP fall by 0.4% in parallel compared to the previous quarter, the benchmark institute Wifo said on Friday, which evokes a “recession in industry” and “losses in construction”. Outside the euro zone, Sweden’s GDP fell by 1.5% in the second quarter, compared to the previous one, a performance much lower than expected.
Fight once morest inflation
The European economy might in this context experience a difficult second half of the year. The President of the European Central Bank (ECB) Christine Lagarde spoke on Thursday of prospects “deteriorated” for the euro area. Keeping the fight once morest inflation as a compass, the guardians of the euro have nevertheless decided to raise their key rates by 0.25 percentage points, for the ninth time in a row. At the same time, the ECB opened the door to a possible pause in the coming months, while the increase in the cost of credit for households and companies weighs on the economy.
(with AFP)
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