"Private Consumption Drives... German Economy Surprises with Q3 Growth"

by Jo Youjin

Published 28 Oct.2022 18:52(KST)

Olaf Scholz, German Chancellor (Photo by EPA)

[Asia Economy Reporter Yujin Cho] Germany, the largest economy in the Eurozone (19 countries using the euro), experienced a surprising 0.3% growth in the third quarter driven by private consumption.

According to Bloomberg on the 28th (local time), the German Federal Statistical Office announced that the third-quarter gross domestic product (GDP) growth rate was 0.3% compared to the previous quarter. This significantly exceeded market expectations of 0.1%.

Germany's GDP grew by 0.8% in the first quarter, 0.1% in the second quarter, and 0.3% in the third quarter, surpassing pre-COVID-19 pandemic levels for the first time year-on-year.

The Federal Statistical Office stated, "Despite global supply chain disruptions, inflation, and the Ukraine crisis, the German economy has held its ground."

Bloomberg commented, "Although the results exceeded expectations, it is unlikely that the economy will avoid a recession this winter." It added, "The effects of business reopenings after COVID-19 and the government's inflation relief package appear to have offset the negative impacts of the Ukraine war and soaring energy prices."

Ulrich Kater, Chief Economist at Dekabank, predicted, "Despite the remarkable growth in the third quarter, it will be impossible to prevent the German economy from entering a recession in winter."

Joerg Kramer, Chief Economist at Commerzbank, also said, "Strong consumption is the calm before the storm," adding, "Soaring prices will hit purchasing power, making negative growth inevitable in winter."

Earlier, the German Bundesbank forecasted in its October report that downward pressure on the German economy would clearly increase in winter, slowing growth, and that the German economy is on the brink of a recession.