Dhe German economy stagnated in the second quarter. As the Federal Statistical Office announced on Friday in a first estimate, gross domestic product (GDP) remained unchanged compared to the first quarter (0.0 percent) after seasonal and calendar adjustment. According to the latest data, Europe’s largest economy grew by 0.8 percent at the beginning of the year. According to the statisticians, the economy was mainly supported by private and government consumer spending, while the trade balance dampened economic growth.
The list of burdens on the German economy this spring was long: the war in Ukraine and the associated energy crisis, rising prices and ongoing supply bottlenecks. According to the statisticians, all of these factors were clearly reflected in the economic development. In addition, there have recently been more and more signs that the global economy could cool down more and more in the second half of the year. This is also due to concerns about a recession in America.
The economy there shrank by around 0.2 percent in the second quarter compared to the previous quarter, after US GDP had already fallen by 0.4 percent in the first quarter. The American economy has slipped into a so-called technical recession. This is what economists talk about when economic output shrinks for two quarters in a row. High inflation and the ongoing rate hikes by the US Federal Reserve are increasingly slowing down the economy.
The prospects for the development of the German economy in the second half of the year therefore remain uncertain. “While the economy has not contracted, the only positive element in today’s data is probably the upward revision of first-quarter growth,” commented Carsten Brzeski, chief economist at ING Bank. The escalating energy crisis remains the greatest risk to an already bleak outlook. That’s how Commerzbank chief economist Jörg Krämer sees it. “High inflation and fears of a gas crisis have dampened consumer and business sentiment. The risk of recession is increasing,” he warns.
The global resurgence of the corona pandemic and the resulting staff shortages further increased economic concerns, says Alexander Krüger, chief economist at the private bank Hauck Aufhäuser Lampe. “As of today, it would be a success if economic output continued to stagnate in the second half of the year.”
According to estimates by the EU Commission, Europe’s largest economy is expected to grow by just 1.4 percent this year. The International Monetary Fund expects economic growth of just 1.2 percent for the year as a whole.
France and Spain are growing
By contrast, other large economies in the euro area grew in the second quarter. France, the second largest economy after Germany, was able to grow by 0.5 percent between April and June compared to the previous quarter, as the national statistical office Insee announced on Friday based on preliminary results. In the first quarter, the French economy was still stagnant due to the consequences of the corona pandemic.
According to the French statisticians, consumer spending in the spring fell by 0.2 percent compared to the previous quarter. However, business investments increased by 0.6 percent. Foreign trade was a major contributor to growth, as imports fell 0.6 percent while exports rose 0.8 percent. For the year as a whole, the French central bank is expecting growth of 2.3 percent, and the Ministry of Finance is forecasting 2.5 percent. Uncertainty about the energy supply in Europe and the war in Ukraine also weigh on the outlook for the economy there.
Spain’s economy also grew surprisingly significantly in the second quarter. After a weak plus of 0.2 percent at the beginning of the year, economic output in the second quarter rose by 1.1 percent compared to the previous quarter, as the Spanish statistical office INE announced on Friday in Madrid.
Unemployment rate rises to 5.4 percent
Meanwhile, the number of unemployed in Germany rose by 107,000 to 2.47 million in July. The main reason for this is the further recording of Ukrainian refugees in the labor market statistics, as the Federal Employment Agency announced on Friday in Nuremberg. Compared to July 2021, the number of unemployed fell by 120,000. The unemployment rate was 5.4 percent, up 0.2 points from June. For its July statistics, the federal agency used data available up to July 12.
“Unemployment and underemployment increased more sharply in July than is usual for the season,” said Daniel Terzenbach, board member of the Federal Employment Agency. This is due to the Ukrainian refugees, who were initially classified as asylum seekers, but are now included in basic security and thus appear in the unemployment statistics. “Overall, the job market remains stable despite all the burdens and uncertainties,” said Terzenbach.
The use of short-time work has recently continued to decline, as the Federal Agency also announced. Reliable data are available until May. At that time, 328,000 people in Germany were on short-time work. With more than 2000 employees, the federal agency is still working through the short-time work peaks from the lockdown phases of the corona pandemic. At the peak, almost six million people in Germany were on short-time work.
The chances of getting a job are still high. According to the Federal Agency, 881,000 vacancies were reported in July. That is 136,000 more than a year ago.
