The German economy—Europe’s largest—shrank by 0.1 percent in the second quarter of 2024 compared with the previous three-month period, the nation’s statistics office reported on Tuesday.
The main reason for this “cooling” was the drop investment in manufacturing and construction, with investment in machinery, equipment and vehicles fell by 4.1 percent, while construction investment dropped by 2.0 percent.
According to the German foreign ministry, international trade also faltered, with goods and services exports falling by 0.2 percent in the second quarter, alongside stagnant levels of imports.
Private consumption also fell by 0.2 percent but a significant rise government consumption expenditure of 1.0 percent, kept consumer spending stable.
Compared to the second quarter of 2023, GDP was actually 0.3 percent higher after adjusting for prices, but the addition of one more working day to the second quarter meant that, in reality, it remained the same.
The construction industry’s economic output fell by 3.2 percent and in the manufacturing industry by 0.2 percent.
Trade, transport and hospitality also saw falls of 0.6 percent compared to the first quarter of 2024.
The labor market had a stable quarter, according to official figures, 46.1 million people were employed in the second quarter, 167,000 or 0.4 percent more than in the same period last year.
Net earnings also rose by 5.3 percent in the same time frame compared to the previous year due to higher wage agreements in the wake of inflation and tax-free inflation compensation premiums.
However, this has not translated to higher spending by consumers who remain pessimistic about the general economic outlook and are opting to save instead.
Nuremberg Institute for Market Decisions Consumer Analyst Rolf Buerkl said said, “Slightly rising unemployment figures, an increase in company insolvencies and staff reduction plans at various companies in Germany are causing a number of employees to worry about their jobs.”
Pouring more cold water on already tepid economic news, he added that any recovery seen in August was only a blip due to the European Football Championships held in Germany.
Germany’s economic development lagged behind that of many other countries, according to the statistics office, with the EU as a whole seeing a rise in GDP of 0.3 percent.
In the first quarter of 2024, German gross domestic product rose by 0.2 percent quarter on quarter but the office revised its year-on-year change for the second quarter in price-and calendar-adjusted terms to 0.0 percent, up from a previously reported -0.1 percent.
Chief economist at ING Germany Carsten Brzeski described Germany as “stuck in stagnation.”
“With disappointing second-quarter growth and almost all confidence sentiment indicators pointing south, the German economy is currently back where it was a year ago: stuck in stagnation as the growth laggard of the entire eurozone.”
