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Financial News: German Economy To Enter Recession In Q1 -

German Economy To Enter Recession In Q1 - Ifo

01/30/2024 - 06:12:00 (RTTNews)

(RTTNews) - Germany's economic output is set to shrink in the first quarter by a further 0.2 percent amid a decline in demand across the board, ifo Institute forecast on Tuesday.

"This would tip the German economy into recession," ifo Head of Forecasts Timo Wollmershauser said.

Offical data released on Tuesday showed that Germany's GDP dropped 0.3 percent in the fourth quarter after stagnating in the previous two quarters.

Wollmershauser pointed out that demand is declining in almost sectors of the economy.

A fall in new orders and a wave of cancellations point to this in manufacturing and construction, especially in the residential segment, the think tank said.

"It appears that restrictive monetary policy in Europe and North America, with its aim of stabilizing prices through sharp rises in key interest rates, is now taking full effect," Wollmershauser said.

In addition to the falling demand, other factors such as high illness levels, rail strikes at Deutsche Bahn and an unusually cold and snowy January are plaguing the biggest euro area economy, the ifo official said.

That said, private consumption offers some hope as sales in the retail and hospitality sectors have already increased ahead of Christmas and till mid-January.

There are signs of further growth in the first quarter as household incomes are now rising faster than prices that would likely lead to a noticeable recovery in the purchasing power, Wollmershauser said.

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