Final data published by the Federal Statistical Office (Destatis) showed that in the 1st quarter, GDP shrank by 0.3% after falling by 0.5% in the 4th quarter. Economists had expected GDP to remain unchanged, according to a preliminary estimate. This revised figure indicated a second consecutive quarter of economic decline, plunging Europe's largest economy into a recession.
Household final consumption expenditure decreased by 1.2% in the first quarter, while households reduced spending on food and beverages, clothing and footwear, and furniture. In addition, households purchased fewer new cars, which is likely attributable, in part, to the discontinuation of grants for plug-in hybrids and the reduction of grants for electric vehicles at the start of 2023. Meanwhile, government final consumption expenditure fell by 4.9% in quarterly terms, and gross fixed capital formation in construction rose by 3.9%. Gross fixed capital formation in machinery and equipment also increased markedly (+3.2%). Exports of goods and services increased by 0.4% compared to the 4th quarter, while imports decreased by 0.9%.
The data also showed that in annual terms, GDP fell by 0.5% after an increase of 0.8% in the 4th quarter. It marked the first period of economic contraction since the first quarter of 2021, primarily driven by persistently high inflation and increased borrowing costs. Consensus estimates assumed a decline in GDP by 0.1%.