German output shrank more than expected at the end of 2022 as Europe’s economy struggles with the fallout from the energy crisis and the war in Ukraine.
(Bloomberg) — German output shrank more than expected at the end of 2022 as Europe’s economy struggles with the fallout from the energy crisis and the war in Ukraine.
Gross domestic product contracted 0.4% in the fourth quarter, double the previously reported drop. The statistics office said that declines in capital investment and private consumption were primarily to blame, while government spending had a positive effect.
Analysts predict another negative result this quarter, which would tip the economy into a recession. Even so, an unusually warm winter has meant Germany dodged the gloomier scenarios feared when Russia invaded Ukraine a year ago.
Recent indicators have given reason for optimism in Germany’s resilience, with Ifo and ZEW expectation gauges published earlier this week both increasing more than anticipated.
Similarly, surveys of purchasing managers signaled private activity returned to growth this month after more than half a year of negative readings, with an easing of supply shortages and expansion in the services sector driving the rebound.
Still, the manufacturing PMI contracted again in February, with manufacturers highlighting a continued downturn in new orders, led by a sustained sharp drop in export sales.
The jump in energy costs has been particularly tough on industry. German chemical giant BASF SE said Friday will close several factories, including two ammonia plants and related fertilizer facilities, resulting in 700 job cuts at its main Ludwigshafen plant.
–With assistance from Joel Rinneby and Kristian Siedenburg.
(Updates with BASF job cuts in final paragraph)
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