Link Securities | Germany’s central bank, the Bundesbank, as reflected in its Monthly Bulletin, expects Germany’s Gross Domestic Product to contract in 1Q2023 relative to the previous quarter. The Bundesbank believes that the productivity of the German economy could fall again in 1Q2023, albeit less sharply than in the previous quarter.
According to the bulletin, the German economy recovered at the beginning of 2023 only with difficulty from the sharp and broad-based setback in December last year. Moreover, it points out that industry and construction output rose strongly again in January and even exceeded the average of the previous quarter. For their part, merchandise exports recovered only partially and consumption suffered from consumer caution due to the sharp rise in prices. Retail turnover remained at the previous month’s level, which was already contained, and was well below the quarterly average. Finally, and still according to the Bundesbank, consumer confidence recovered somewhat, but remained at a very low level, something that also occurred with business confidence, which improved in February, but remains pessimistic.
In short, according to the Bundesbank bulletin, German economic activity will fall again this quarter. The fall could, however, be milder than in 4Q2022, when the economy contracted by 0.4% after the revision of the Federal Statistical Office’s data. The German economy will thus enter a technical recession after contracting for two consecutive quarters.
Assessment: Germany’s economy finally looks as if it will not be able to avoid entering a technical recession this winter. However, it looks set to be moderate, something that, we believe, has already been more than assimilated by markets that are currently focused on other factors, such as high and persistent inflation, the ECB’s interest rate hikes and, more recently, the crisis of confidence in the banking sector.
