Germany officially in recession as soaring inflation grips Europe's biggest economy

Germany, Europe's biggest economy, is officially in recession. (Credit: Getty Images)Germany, Europe's biggest economy, is officially in recession. (Credit: Getty Images)
Germany, Europe's biggest economy, is officially in recession. (Credit: Getty Images)
Germany has been heavily affected by abandoning Russian gas supplies and increasing inflation rates

Germany has been pushed into a recession after the country's economy shrunk for two consecutive quarters.

The country, which is home to Europe's largest economy, saw the gross domestic product contracting by 0.3% between January and March. It followed a 0.5% contraction in October to December 2022.

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The German economy has been put under strain by soaring inflation rates in the past year. As of April 2023, the German inflation rate stood at 7.2%.

This was higher than the average across Europe but still below the UK's eye-watering inflation rate of 8.7% - the International Monetary Fund (IMF) had previously predicted recessions in Germany and the UK in 2023. Households in the country have seen prices increase for items such as food, clothing and furniture.

In a statement, German federal statistics agency Destatis said: "The persistence of high price increases continued to be a burden on the German economy at the start of the year. The reluctance of households to buy was apparent in a variety of areas: households spent less on food and beverages, clothing and footwear, and on furnishings in the first quarter of 2023 than in the previous quarter."

In addition to this, Germany weaning off of Russian sources of gas had dampened the economy. The country cut its supply in the wake of the 2022 invasion of Ukraine.

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Destatis had originally forecasted that Germnay would avoid a recession, predicting that there would be zero growth. However the reduction in household spending - 1.2% lower than what was expected - meant that this was adjusted.

Finance Minister Christian Lindner said that the new statistic showed "surprisingly negative signals". He added: "I don't want Germany to play in a league in which we have to relegate ourselves to the last positions."

It comes as the IMF announced that the UK was surprisingly expected to narrowly avoid a recession. The group expects the UK's economy to grow by 0.4%, up from 0.3% in its predictions from last month.

Chancellor Jeremy Hunt welcomed the new forecast, saying that it "credits our action to restore stability and tame inflation". He added: "If we stick to the plan, the IMF confirms our long-term growth prospects are stronger than in Germany, France and Italy."

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