The German economy in the third quarter showed an unexpectedly good result and surpassed analysts' forecasts, which had expected a fall in GDP by 0.2%. Contrary to experts' expectations, Germany's GDP grew by 0.3%, which has already led to a revision of forecasts by financial institutions in favor of an increase. Now economists are waiting for the softer consequences of the energy crisis and note the reduction of risks in relation to the German economy, according to Bloomberg.
“The data is absolutely staggering, given that many indicators show that the economy is slowing significantly for several months,” says LBBW economist Jens-Oliver Niklash.
Niklash links the good performance in GDP to the reopening of the economy after covid restrictions, as well as the consequences of the summer package of assistance to citizens who supported the trade and services sector. However, the positive effect ends, and the negative factors in the form of an energy crisis and the sharp rise in prices caused by it will still prevail, and the German economy will enter a recession, analysts believe.
However, the depth of this recession, taking into account today's statistics, will most likely not be as deep as most analysts had expected until now. The agency notes that other major economies, on the contrary, reported lower than expected rates – for example, the economies of France and Spain grew by only 0.2% of GDP. Not everyone shares the sudden optimism, S&P analysts still believe that Germany will become the key EU economy, which will drag the eurozone into recession in the near future.
The negative trend may be reversed by a too warm winter, which will ease the pressure on the energy sector and allow businesses and households to save. Already now, among other things, above-normal temperatures have helped to avoid a hard landing for the German economy, but this trend is likely to come to naught in winter, the agency notes.
“The German economy is currently contracting, but perhaps more slowly than most people fear, and this is a bright spot. But still, it is unlikely that we will be able to avoid a recession,” says Ifo President Clemens Fuest.
Analysts now expect the German economy to contract by 0.4% in the coming quarter and 0.5% in the first quarter of 2023. The German authorities found themselves in the most vulnerable position after Russia's refusal to supply gas to the European Union. Germany is the center of the heavy and chemical industries, which are extremely dependent on energy supplies. Gas shortages are forcing entire businesses to shut down, scale back production, or even relocate them to other jurisdictions. The authorities are trying to mitigate the effects of the energy crisis by approving a massive plan to support the economy for €200 billion.