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Germany's economy shows slight upturn, raising hopes

April 30, 2024

The German economy has shown a marginal upturn in the first part of the year. The latest figures give some hope that Germany may be escaping the economic doldrums.

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Robot production line at a BMW plant
The slight upturn is seen as a possible sign of the green shoots of recoveryImage: Sven Hoppe/picture alliance/dpa

Europe's largest economy grew in the first quarter of 2024, reversing a slump at the end of last year, according to Germany's Federal Statistical Office Destatis on Tuesday.

The figure could vindicate those economists who have said Germany's energy-intensive economy could now be set for a turnaround after a period of slump.

What is the German economy growth rate?

Output rose by 0.2% from January to March compared with the previous three months, when the economy shrank by a revised 0.5%, Destatis said.

The office said the latest increase reflected an improvement in both the construction industry and exports. 

However, household consumption fell in the quarter, it added.

There has been a prevailing mood of economic gloom in Germany, as businesses struggle with raised energy costs, high inflation, and elevated interest rates.

In 2023 as a whole, Germany slipped into a slight recession with a fall in GDP of 0.2%, adjusted for price. 

What's wrong with Germany's economy?

The outlook appears to come down, with energy costs and inflation easing. 

Data on Tuesday also showed that the 20-country eurozone economy had emerged from recession with greater-than-expected growth in the first quarter of 2024 and inflation under control.

The EU's official data agency said growth in the single currency area had reached 0.3% in the first quarter compared with the end of 2023.

How optimistic can Germans be?

ING bank analyst Carsten Brzeski said the upturn showed that "the German economy can grow after all."

"The words 'optimism' and 'German economy' together in one sentence have been a rarity for a long while," said Brzeski. "However, for a few weeks now, optimism has returned to the German economy."

Brzeski warned that higher oil prices as a result of the military conflict between Iran and Israel, as well as the ongoing tensions in the Red Sea, could pull down industry and exports. 

He also warned of increasing of insolvencies that could weaken the labor market, although new figures also show unemployment in Germany for April remained stable, at 5.9%.

rc/wd (dpa, AFP)

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