The German economy: weak GDP and consumption

The German economy would grow 0.2% in 2024 and 1.3% in 2025, following a 0.3% contraction in 2023, according to projections by the International Monetary Fund (IMF).

In its most recent performance, Germany‘s Gross Domestic Product (GDP) declined 0.3% in the fourth quarter of 2023 compared to the third quarter of 2023 after adjusting for prices, seasonal and calendar effects.

The IMF revised the pace of recovery downward by 0.3 percentage points for the German economy for both 2024 and 2025 amid persistently weak consumer sentiment, although this adjustment is largely offset by improvements in several smaller economies, including Belgium and Portugal.

After Germany’s GDP more or less stagnated in the first three quarters of 2023, economic performance declined in the fourth quarter of 2023. 

While the decline in capital formation had a discouraging effect on economic activity, consumption increased slightly. 

German economy

In Q4 2023, household final consumption expenditure increased 0.2% compared to Q3 2023. This was partly due to higher demand for services. 

At the same time, according to Rentenbank, government final consumption expenditure increased 0.3% in Q4 2023 compared to Q3 2023. 

In contrast, capital formation declined sharply compared to Q3 2023. 

Gross fixed capital formation in construction decreased by 1.7%, following declines that had already been recorded in Q2 2023 and Q3 2023. 

The decline in gross fixed capital formation in machinery and equipment at the end of the year was even steeper, falling 3.5 percent.

International trade

In Q4 2023, exports of goods and services decreased 1.6 percent compared to Q3 2023, while imports declined 1.7 percent compared to Q3 2023. 

The lower trade in goods was partly due to lower external demand, ongoing geopolitical tensions, and high energy prices.


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