Economy

Germany falls into recession as inflation hits economy

Published

1 year ago

May 25, 2023

Harry Miller

By Lucy Hooker

Business reporter, BBC News

Persistent inflation has helped push Germany into recession in the first three months of the year, an upgrade to growth data shows.

Europe’s largest economy was also badly affected when Russian gas supplies dried up after the invasion of Ukraine, analysts said.

The economy contracted by 0.3% between January and March, the statistics office said.

That followed a 0.5% contraction in the last three months of last year.

A country is deemed to be in recession when its economy shrinks for two consecutive three-month periods, or quarters.

“Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him,” said Andreas Scheuerle, an analyst at DekaBank.

Germany’s inflation rate stood at 7.2% in April, above the euro area’s average but below the UK’s 8.7%.

Higher prices have weighed on household spending on things such as food, clothing and furniture. Industrial orders are also weaker, reflecting the impact of higher energy prices on businesses.

“The persistence of high price increases continued to be a burden on the German economy at the start of the year,” the federal statistics agency Destatis said in a statement.

Originally, the agency had estimated zero growth for the first quarter of this year, suggesting Germany would side-step a recession.

However, the revised figures showed household spending was 1.2% lower than in the previous quarter.

Government spending was 4.9% lower, and car sales also fell after government grants for electric and hybrid cars were scaled back.

The recession was less severe than some had predicted, given Germany’s heavy reliance on Russian energy. A mild winter and the reopening of China’s economy, helped ease the impact of higher energy prices.

Private sector investment and exports rose, but that was not enough to get Germany out of the “danger zone” for recession, analysts said.

“The early indicators suggest that things will continue to be similarly weak in the second quarter [of 2023],” said LBBW bank analyst Jens-Oliver Niklasch.

However, the German central bank, the Bundesbank, expects the economy to grow modestly in the April to June quarter, with a rebound in industry offsetting stagnating consumer spending.

The IMF has predicted that Germany will be the weakest of the world’s advanced economies, shrinking 0.1% this year, after it upgraded its forecast for the UK from minus 0.3% to growth of 0.4%.

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

2 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

3 days ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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Economy

Statistics Canada says manufacturing sales fell 1.3% to $69.4B in August

Published

3 days ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.

The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.

The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.

Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.

Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.

Overall manufacturing sales in constant dollars fell 0.8 per cent in August.

This report by The Canadian Press was first published Oct. 16, 2024.

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