Germany recorded zero growth in the second quarter and sees a looming recession
Germany is posting worrying growth after the US. Indeed, according to preliminary figures released on Friday, July 29, the country will record a zero growth rate in the second quarter of 2022.
After growth of 0.8% in the first quarter, Europe’s leading economy is fighting back “a difficult global economic environment with the Covid-19 pandemic, disrupted supply chains, rising prices and the war in Ukraine”explains the Federal Statistical Office Destatis in a press release.
This growth rate ranks the country as the weakest performer in the euro zone in the second quarter, while all European countries are hit by high inflation (8.9%), and stokes fears of a recession in the coming months.
The consequences of the “still to come” energy crisis
The war in Ukraine ended the strong recovery in the German economy that began a year ago after the historic recession caused by the 2020 pandemic.
First, the resulting inflation in energy prices particularly penalizes the country’s powerful industry, which depends on Russian gas.
According to a study by the country’s Chamber of Commerce and Industry (DIHK), 16% of industrial companies were forced to respond to the energy crisis by cutting back production or at least partially shutting down areas of activity.
The gas bought from Russia is cheaper to produce and transport and has for decades contributed to the prosperity of German industry, which consumes 30% of the gas burned in Germany. More than half of the gas imported by the country came from Russia before the war in Ukraine. This proportion has now risen to 35%.
The Energy Crisis “still coming for the economy” German economy, Economics Minister Robert Habeck warned in advance on Friday “a difficult winter”.
From 1ah October, the Germans in particular will shoot up with the government’s decision, noted on Thursday, to be allowed to pass on the energy price increase to consumers.
“A difficult but necessary decision”commented the minister, specifying that this would constitute an indictment “A few hundred euros more per household”for which the government has promised help.
Rising unemployment rate
Added to this is the impact of Beijing’s anti-Covid-19 policy on the German economy, which has led to exit restrictions and factory closures in China, the country’s largest trading partner. Exporting companies, pillars of the German model, are particularly affected, especially the automotive sector, which is deprived of essential components.
Services benefited from the lifting of health restrictions, but the rebound ended in June amid high inflation, which is eroding household spending power.
Since the spring, however, Berlin has been expecting gross domestic product (GDP) to increase by 2.2% this year, compared to 1.9% according to the Bundesbank’s June forecast. But stopping Russian gas supplies to Europe would reduce the value of German GDP by 1.5% in 2022 and 2.7% in 2023, according to the IMF.
The unemployment rate rose for the second straight month in the country in July “Registration of Ukrainian Refugees” on the job market, the employment agency said in a statement on Friday.
The country also suffers from serious labor shortages in all sectors: the authorities count 881,000 vacancies, ie 136,000 more in one year.
