BERLIN (AP) — The German economy shrank by 0.4% in last year’s fourth quarter, the national statistics office said Friday, a sharp downward revision from its initial report that gross domestic product declined by 0.2%.
The quarter-on-quarter contraction in the October-December period was the first since the first quarter of 2021. Consumer spending, which propped up growth in the first nine months of last year, dropped by 1% in the final three months of 2022.
Investment in construction and machinery showed bigger drops in the final quarter, the Federal Statistical Office said.
The full-year 2022 growth figure for Germany — Europe’s biggest economy — remained at the 1.8% that the office reported at the end of January.
The economy has generally held up well, despite pressure from high inflation and fears last year of an energy crunch as Russia reduced and then cut off its gas supplies to Germany. That didn’t materialize.
On Wednesday, a closely watched survey showed German business confidence strengthening for the fourth consecutive month. That, however, was due entirely to an improvement in companies’ outlook for the next six months. Their assessment of the current situation worsened slightly for the second consecutive month.
That, coupled with weak consumer confidence and other factors, underlines expectations that the German economy will contract again in the current first quarter, ING economist Carsten Brzeski said.
“Not falling off the cliff is one thing; staging a strong rebound, however, is a different matter,” he said in a research note. He added that industrial orders have been weakening for the past years, consumer confidence, “is still close to historic lows, the loss of purchasing power will continue in 2023, and the full impact of monetary policy tightening still has to unfold.”