German economy contracts slightly in Q3
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The Federal Statistical Office (Destatis) also reports that the result published in the first release of 30 October 2023 has therefore been confirmed.
“After the weak economic development seen in the first half of 2023, the German economy began the second half of the year with a slight drop in performance,†says Ruth Brand, President of the Federal Statistical Office.
Economic performance was virtually stagnant in the first two quarters of the year (first quarter: 0.0%, second quarter: +0.1%).
In the third quarter of 2023, final consumption expenditure as a whole remained around the same level as the previous quarter (-0.1%) after adjustment for price, seasonal and calendar variations.
While household final consumption expenditure was down on the second quarter of 2023 (-0.3%), government final consumption expenditure increased somewhat for the first time in more than a year (+0.2%). Positive contributions came from gross fixed capital formation.
Compared with the previous quarter, gross fixed capital formation in machinery and equipment in the third quarter increased by 1.1% and gross fixed capital formation in construction by 0.4% after price, seasonal and calendar adjustment.
Foreign trade decreased in the third quarter of 2023 on a price, calendar and seasonally adjusted basis. Total exports of goods and services fell by 0.8% compared with the second quarter of 2023. Imports declined even more (-1.3%).
In the third quarter of 2023, gross value added as a whole increased by 0.1% on the second quarter of 2023 after adjustment for price, seasonal and calendar variations, with trends diverging across sectors.
Economic performance was down markedly by 1.3% in industry (excluding construction).
A substantial decline was recorded for the energy supply sector, and manufacturing saw a 0.9% drop in gross value added on the previous quarter. This was mainly due to a considerable decrease in the production of motor vehicles, trailers and semi-trailers.
By contrast, gross value added was up on the previous quarter in construction (+0.4%) and in nearly all service branches.
The increase was largest in the aggregate sector of trade, transport, accommodation and food services (+1.7%) and for financial and insurance activities (+1.1%).
An exception was the public services, education, health sector, with gross value added declining by 0.2%.
GDP in the third quarter of 2023 was down a price adjusted 0.8% compared with the third quarter of 2022. After price and calendar adjustment, the decrease was smaller (-0.4%), as there was one working day less than in the same period a year earlier.
Price adjusted household final consumption expenditure was 2.0% lower compared with a year earlier. Here, the persistently high prices continued to have a noticeable effect especially on food and beverages, restaurant and accommodation services and semi-durables such as clothing.
In each of these categories, considerably less was spent than in the previous year, after adjustment for price variations.
By contrast, there were positive signs from the transport sector, partly due to more purchases of passenger cars.
Government final consumption expenditure also declined year on year (-1.6%, price adjusted), though somewhat less than household final consumption expenditure. Central government, in particular, spent less on final consumption expenditure than a year earlier.
One reason for the decline was the substantially lower expenditure on Covid-19 vaccines compared with the third quarter of 2022.
Gross fixed capital formation in machinery and equipment increased by a price adjusted 1.1% year on year. More was invested especially in commercial vehicles than a year before. By contrast, gross fixed capital formation in construction decreased by a total of 1.0% after price adjustment.
A larger decline was prevented by the positive development recorded for building completion work and by construction prices rising less sharply. Compared with the third quarter of 2022, domestic uses on the whole were down a price adjusted 1.7% in the third quarter of 2023.
Foreign trade decreased substantially year on year.
Exports of goods and services declined by 3.8% (price adjusted) in the third quarter of 2023 on the same quarter a year earlier.
An even larger drop was observed for imports (-5.7%) in the same period. This was mainly due to a substantial decline in goods imports (-8.2%), in particular mineral fuel imports.
Overall, the price adjusted gross value added in the third quarter of 2023 was 0.7% lower than in the third quarter of 2022.
Economic performance in industry (excluding construction) was down considerably (-3.8%) compared with the same quarter a year earlier.
Production declined in industry and especially in the energy supply sector, whereas construction recorded an increase for the first time since the beginning of 2022 (+1.2%). This is attributable to the positive development in civil engineering and building completion work.
The price adjusted gross value added in the service sector as a whole was virtually on the level of the third quarter of 2022 (+0.1%).
The development was positive in information and communication (+2.1%), other services (+1.1%), real estate activities (+1.0%) and business services (+0.3%), while economic performance was down on the same quarter of the previous year in the aggregate sectors of public services, education, health (-0.5%) and trade, transport, accommodation and food services (-0.4%).
The economic performance in the third quarter of 2023 was achieved by roughly 46.0 million persons in employment whose place of employment was in Germany.
This represented an increase of 337,000, or 0.7%, compared with the third quarter of 2022.
At +0.3% (not seasonally adjusted), the usual autumn upturn on the previous quarter was however somewhat lower than a year earlier.
The number of persons in employment reached a new all-time high nevertheless (see press release no. 444 of 16 November 2023 (only in German)).
The average number of hours worked per person in employment was down by 0.7% compared with the third quarter of 2022.
This was in part attributable to a calendar effect as there was one working day less than a year earlier, and to overtime reduction and a higher part-time employment rate.
The labour volume of the overall economy - the higher number of persons in employment multiplied by the number of hours worked per person in employment - remained unchanged (0.0%) in the same period. This is shown by provisional calculations of the Institute for Employment Research (IAB) of the Federal Employment Agency.
Overall labour productivity (price adjusted GDP per hour worked by persons in employment) fell 0.8% on the same quarter of the previous year, according to provisional calculations. Labour productivity per person in employment was 1.6% lower year on year.
At current prices, GDP rose by 6.0% and the gross national income by 6.4% in the third quarter of 2023 compared with a year earlier.
Net national income at factor costs was up 6.1% on the third quarter of 2022.
The compensation of employees increased by 6.9% according to provisional calculations; property and entrepreneurial income rose by 4.2%. Average gross wages and salaries per employee went up by 6.4% year on year in the third quarter of 2023.
Net average earnings increased even more (+7.9%) due to the weak development of wage tax revenue.
This can probably be attributed mainly to tax-free payments of premiums compensating for inflation and to higher wage settlements. In addition, the statutory minimum wage was raised in October 2022, which led to overproportionate increases in the average earnings of marginally employed persons.
Total gross wages and salaries rose by 7.3% on a year earlier as the number of employees also went up once more.
At +3.8%, the year-on-year increase in household final consumption expenditure at current prices was considerably smaller than in the previous quarters.
The savings ratio was higher in the third quarter of 2023 (10.3%) than in the previous year (9.6%) because households’ disposable income (+4.7%) grew more strongly than their consumption expenditure.
Weak economic performance was also registered in the other large Member States of the European Union (EU) at the beginning of the second half-year.
The price, seasonally and calendar adjusted GDP stagnated quarter on quarter in Italy and in the EU as a whole (0.0%), while the economy grew slightly in France (+0.1%) and Spain (+0.3%).
At +1.2%, GDP increased markedly more in the United States (USA) than in most European countries. Compared with the same period a year earlier, Germany (-0.4%) ranked more clearly below the EU (+0.1%) in terms of economic development. ■