The economy German economy shrinks slightly in the second quarter

The German economy is not getting off the ground. Gross domestic product fell by 0.1 percent in the second quarter, according to preliminary data from the Federal Statistical Office in Wiesbaden.

After a brief interim high at the beginning of the year, the economy has thus suffered another setback. The statisticians cited weak investment as the reason.

Last year, Germany slipped into a slight recession with a price-adjusted decline of 0.3 percent. The export-oriented German economy felt the effects of the global economic slowdown as well as soaring energy prices and rapidly rising interest rates. There is also a shortage of skilled workers and companies are complaining about too much bureaucracy.

"Bloodless growth"

The unexpected decline in gross domestic product shows once again that there can be no talk of a significant upturn in Germany, wrote Commerzbank chief economist Jörg Krämer. "The triple decline in the Ifo business climate and the weakness of other economic indicators suggest anemic growth at best for the second half of the year." The easing burden of the recent interest rate and energy price hikes has hardly been reflected in an economic recovery so far.

A rapid recovery is not in sight this year. In the first quarter, Europe's largest economy only grew slightly by 0.2 percent. And economists are also forecasting only mini-growth for the year as a whole: the German Council of Economic Experts, for example, is still expecting growth of 0.2 percent - slightly less than the German government's forecast (0.3 percent).

There are plenty of headwinds for the German economy: China has lost momentum as a growth driver on the global markets and the number of company bankruptcies is rising in Germany. An initial interest rate cut by the European Central Bank in June has not yet brought any resounding improvement for the German economy.

Bringing up the rear among the G7

The International Monetary Fund predicts growth of just 0.2 percent for Germany in 2024 - the weakest rate of all the leading western G7 industrialized nations. By comparison, the IMF expects the global economy to grow by 3.2 percent. A debate about Germany as a business location has long since flared up.

Important sectors are also weakening: While the chemical industry is suffering from comparatively high energy prices, the automotive industry is struggling with the transition to e-mobility and the construction sector has clouded over following the real estate boom. To support the economy, the German government has introduced relief measures for companies, including improvements to tax depreciation and an extension of the research allowance.

SDA