German economy shrinks more than expected in fourth quarter

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German economy contracted more than expected as new restrictions imposed at the end of the year dampened household spending, data from Destatis showed on Friday.

Gross domestic product fell 0.7% sequentially in the fourth quarter, reversing the 1.7% expansion in the third quarter. Economists had forecast the economy would contract by 0.3%.

On an annual basis, GDP grew by 1.4%, but slower than the 2.9% expansion recorded in the third quarter.

Compared to the end of 2019, the quarter before the Corona crisis started, GDP was 1.5% lower in the fourth quarter of 2021.

GDP growth for the whole of 2021 has been revised slightly to 2.8% from 2.7% estimated on January 14.

Previously, the government lowered its growth outlook for 2022 to 3.6% from 4.1%.

Private consumption, in particular, fell in the fourth quarter, while government consumption expenditure increased. Construction investment fell from the third quarter, the data showed. Detailed fourth quarter results are expected on February 25.

With this weak fourth quarter, the probability that Germany will be in recession at the start of the year has increased, said Carsten Brzeski, economist at ING.

Even if the economy were to fall into a technical recession, this recession will be mild and short-lived and should not hurt the labor market, the economist added. “On the contrary, we stick to our view that the German economy will make an impressive comeback in the spring.”

Andrew Kenningham, economist at Capital Economics, said: “We doubt Germany’s recovery will be very strong this year as supply chain issues are only expected to resolve slowly, but also due to ongoing Covid concerns. and high inflation.

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