Germany posts zero growth in the second quarter and sees the threat of a recession looming

After the United States, Germany is recording a growth rate that raises concerns. The country is indeed posting a zero growth rate in the second quarter of 2022, according to preliminary figures published on Friday July 29.

After growth of 0.8% in the first quarter, Europe’s leading economy is struggling in “a difficult global economic context, with the Covid-19 pandemic, disrupted supply chains, rising prices and the war in Ukraine”explains the federal statistical institute Destatis in a press release.

This growth rate is tipping the country ranked among the weakest economic performers in the euro zone in the second quarter, when all European countries were affected by high inflation (8.9%), and fueling fears of a recession in the coming months.

Read also: In the United States, growth is contracting and fears of a recession are growing

The consequences of the “yet to come” energy crisis

The war in Ukraine ended the strong rebound of the German economy that began a year ago, after the historic recession caused by the pandemic in 2020.

In the first place, the inflation of energy prices that it has caused is particularly penalizing the powerful industry of the country, dependent on Russian gas.

According to a study by the country’s Chamber of Commerce and Industry (DIHK), 16% of industrial companies have been forced to react to the energy crisis by reducing production or suspending, at least partially, sectors of activity. .

Read also: Article reserved for our subscribers Reduction of Russian gas deliveries: Westerners and Moscow blame each other

Cheaper to produce and transport, the gas purchased from Russia has contributed for decades to the prosperity of German industry, which consumes 30% of the gas burned in Germany. More than half of the gas imported by the country came, before the war in Ukraine, from Russia. This share has since risen to 35%.

The energy crisis “is yet to come for the economy German economy, thus warned Friday the Minister of the Economy, Robert Habeck, anticipating “a difficult winter”.

From 1is October, the Germans will in particular see their bills soar with the decision of the government, recorded on Thursday, to allow the passing on of the rise in energy prices to the consumer.

“A difficult but necessary decision”commented the Minister, who specified that this would represent a charge of “a few hundred extra euros per household”for which the government has promised aid.

Rising unemployment rate

Added to this is the impact on the German economy of Beijing’s policy against Covid-19, which has led to confinements and factory closures in China, the country’s largest trading partner. Exporting companies, pillars of the German model, are particularly affected, in particular the automotive sector deprived of essential components.

Services benefited from the lifting of health restrictions, but the upturn ended in June against a backdrop of high inflation which is eating away at household purchasing power.

Since the spring, however, Berlin has been counting on a 2.2% increase in gross domestic product (GDP) this year, against 1.9% according to the June forecast of the Federal Bank (Bundesbank). But a halt in Russian gas deliveries to Europe would reduce the value of German GDP by 1.5% in 2022 and 2.7% in 2023 according to the IMF.

The unemployment rate rose in July in the country, for the second month in a row, due to “registration of Ukrainian refugees” on the job market, the employment agency said in a statement on Friday.

The country is also experiencing a severe shortage of labor in all sectors: the authorities count 881,000 vacancies, ie 136,000 more over one year.

See in graphics: How dependent are European countries on Russian gas and oil?

Le Monde with AFP and Reuters

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