BERLIN (AP) – The German economy grew in the third quarter, an unexpectedly positive development that was largely driven by private spending, official figures showed on Friday. But the immediate outlook for Europe’s largest economy remained bleak as inflation picked up again in October.
According to the Federal Statistical Office, gross domestic product grew by 0.3% in the period from July to September compared to the previous quarter. A slight plus of 0.1% followed in the second quarter.
“The German economy was able to hold its ground despite difficult global economic conditions with the ongoing COVID-19 pandemic, supply chain disruptions, rising prices and the war in Ukraine,” the statistical office said.
The government said earlier this month that GDP is likely to have contracted in the third quarter and was expected to decline again in the last three months of the year and the first three months of 2023 before beginning to recover. Two consecutive quarters of negative growth is a technical definition of a recession.
With high energy pricesLike many other countries, Germany is struggling with skyrocketing inflation. The annual inflation rate rose again in October, rising to 10.4% from 10% in the previous month, according to a preliminary estimate by the Bureau of Statistics released on Friday.
A survey on Tuesday showed the confidence of German companies at its lowest in more than two years as energy concerns fuel expectations of a difficult winter.
Lawmakers cleared the way last week that the government should provide up to 200 billion euros ($195 billion) in subsidies for homes and businesses by 2024 to ease the burden of high energy prices, and the upper house of parliament added its approval on Friday. However, details of this plan are not yet completed.
Officials say Germany is well positioned to get through the winter with enough energy after Russia halted natural gas supplies but emphasize that it still needs to conserve the fuel that heats homes, powers factories and generates electricity.
“Looking ahead, the surprising third-quarter growth doesn’t mean the recession narrative has changed,” said ING economist Carsten Brzeski. “All leading indicators point to a further weakening of the economy in the fourth quarter and an improvement does not appear to be in sight.”
“The pent-up demand and the savings from previous lockdown periods have sufficiently counteracted the dampening effect of the rapidly rising inflation and thus delayed the start of the recession, which we nevertheless expect to continue over the next two quarters,” says Timo Klein, economist at S&P Global Market Intelligence.
In a speech on Friday, President Frank-Walter Steinmeier told Germans that “tougher years are ahead of us, tough years” in a more confrontational world. “The peace dividend has been used up.”
Steinmeier, whose office is largely representative but endowed with moral authority, referred to Germany’s economic strength and its efforts to relieve its population financially, but said: “Even our state will not be able to compensate for all the burdens.”
“It is clear that we will have to accept limitations in the coming years,” he said.