Omicron dampens German economy in fourth quarter


(Adds details, context, analyst)

BERLIN, Jan 28 (Reuters) – Germany’s economy contracted more than expected in the fourth quarter of last year, data showed on Friday, with restrictions aimed at slowing the spread of the Omicron variant hampering activity.

Europe’s largest economy shrank 0.7% quarter-on-quarter in adjusted terms, the Federal Statistics Office said. A Reuters poll predicted a 0.3% contraction in the economy.

Preliminary data showed private consumption fell significantly, the bureau said, while government spending increased. The construction sector also contracted.

The German economy grew by 2.8% last year and the government lowered its economic growth forecast for 2022 to 3.6%. Economy Minister Robert Habeck said on Friday he expected a slowdown to 2.3% in 2023.

Thomas Gitzel of VP Bank Group said easing commodity shortages should help the economy stay on a growth path, but the pandemic was a risk.

“Aggravation of supply chain issues related to a rapidly spreading Omicron wave in China and a military escalation on Ukraine’s eastern border are among the risks,” he wrote in a note.

Western powers fear a Russian invasion of Ukraine could deepen an energy crisis in Europe if the Kremlin responds to sanctions by cutting off gas supplies to Europe. (Writing by Joseph Nasr; Editing by Paul Carrel and Maria Sheahan)

Our standards: The Thomson Reuters Trust Principles.


About Author

Comments are closed.