Germany falls into its first economic recession, and European peak season imports may be affected
Germany in first economic recession, may affect European peak season imports
BusinessDialogue learned that on May 25th, data from the German Federal Statistical Office showed that the German economy shrank by 0.3% in the first quarter compared to the previous quarter. This indicator had dropped by 0.5% in the fourth quarter of last year. When economic output falls for two consecutive months, it can be defined as an economic recession.
This is the first time that Germany has fallen into a recession since the beginning of the pandemic. Despite being the largest economy in Europe, Germany ultimately could not avoid the fate of an economic recession. In January of this year, the German Chancellor expected the economy to remain stable in this quarter, but the results showed that the country’s economy, which is most dependent on exports and industry, has declined.
This year, high inflation has caused German consumers to reduce their consumption, with spending in the first three months dropping by 1.2%. The statistical bureau stated that consumers reduced their spending on food and beverages, clothing and shoes, and furniture, and purchased fewer electric cars as government incentives decreased.
The decrease in purchasing power, weak industrial orders, and the most aggressive monetary policy tightening in decades have all exacerbated the weakness of German economic activity.
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The current economic recession in Germany will reduce demand for goods and services by consumers, as well as related economic activity. Analysts predict that demand for imported goods in Germany and even throughout Europe during the peak season this year will slow down, which will affect export-dependent economies, leading to a global slowdown in trade and causing a broader economic recession.
Rising prices have also exacerbated labor strikes. Since the beginning of this year, labor strikes have occurred in ports in many European countries, including France, Portugal, Greece, Germany, and the Netherlands, causing interruptions in port operations and triggering a series of chain reactions, such as delayed packages and increased costs.
In fact, in the first quarter of this year, the throughput of major ports in Europe, including Hamburg, Rotterdam, and Antwerp, has shown a significant decline.
From January to March, the container throughput of Rotterdam port decreased by 11.6% to 3.2 million TEUs, which started last year due to the decrease in cargo volume with Russia. Antwerp-Bruges port handled 3.1 million TEUs in the first quarter, a decrease of 5.7%, of which Russia-related cargo decreased by almost two-thirds. Rotterdam port suffered from the backlog of inventory and the decrease in demand driven by inflation against the background of a 14.2% decline in container throughput from Asia.
Every year from March to May, the number of containers in European ports will show a significant increase. This cyclical growth is due to the increase in the number of containers loaded with goods from China after the Chinese New Year until the end of May, and retailers stocking up for the peak season. However, this trend did not reappear in 2023, and the number of imported containers remained stable.
There may be multiple reasons for this situation. The first is the impact of the Russia-Ukraine war, followed by the rise in inflation and economic recession, thirdly, the slowdown in trade due to the decline in retailers’ and consumers’ behavior, and many other influences.
In Germany, sales data from retailers such as Zalando SE also reflects the decline in consumer demand, and its inventory level in the first quarter increased due to the decrease in demand.
Currently, Germany’s inflation rate is still high, and unions have been fighting for higher wages with employers to keep up with the rising prices. The European Commission predicts that in terms of economic growth this year, Germany will be the weakest member of the group, with a growth rate of only 0.2%.
German economists predict that, looking at the situation in the second half of the year, economic recession seems more likely than the recovery that most of their colleagues have predicted.
Editor ✎ Ashley/AMZ123
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