On January 31, local time, the preliminary data released by Eurostat showed that after seasonal adjustment, the economy of the Eurozone (1.1016, 0.0027, 0.25%) grew by 0.1% quarter-on-quarter in the fourth quarter of last year. Obviously lagging behind, the country's GDP shrank by 0.2% in the fourth quarter of last year.

A recession is usually defined as two consecutive quarters of contraction, and from this point of view, the chances of a recession in Germany are increasing. The German Federal Statistical Office stated in a press release that in the first three quarters, Germany still achieved good economic performance despite the difficult situation, but the economic performance declined slightly in the fourth quarter. As a comparison, Germany's GDP in the first three quarters of last year achieved a quarter-on-quarter growth of 0.8%, 0.1% and 0.5% respectively.

Regarding economic performance in the fourth quarter, Timo Wollmershäuser, director of ifo forecasting at the German Institute for Economic Research, said: "High inflation has plunged the German economy into a winter recession." will be slightly steeper.

On the same day, the International Monetary Fund (IMF) released the updated content of the World Economic Outlook Report. The IMF sees Germany growing by 0.1% in 2023, up from its forecast last October, when it predicted a 0.3% contraction in 2023.

The German government expects the inflation rate to drop to 6% this year

The Bureau of Statistics stated that the economic downturn in the fourth quarter of last year was mainly due to a decline in private consumption expenditure.

Ding Chun, director of the Center for European Studies at Fudan University and the Jean Monnet Chair Professor of the European Union, told the 21st Century Business Herald reporter that the German economy is a strong real economy and an export-oriented economy that relies heavily on exports. The center of the European industrial chain, one of the industrial chains. "Due to the conflict between Russia and Ukraine and the energy crisis, some industries, especially energy-intensive industries, including chemicals, machinery manufacturing, and automobiles, have been severely affected. At the same time, the impact of the energy crisis on private consumption and investment has caused negative growth in the fourth quarter. Case."

Ding Chun believes that "Germany's historically high inflation level has seriously weakened the competitiveness of the German economy." In September 2022, Germany's CPI rose to double-digit 10%, and further rose to 10.4% in October. In the following two months, the inflation data declined, but remained at a high level. The CPI data in November was 10%, and further fell to 8.6% in December.

For the whole year, the German CPI will rise by 7.9% year-on-year in 2022. For comparison, the German CPI will rise by 3.1% year-on-year in 2021. Energy and food have become the biggest driving forces. In the past year, the price of energy products in Germany has increased by 34.7% year-on-year, and the price of food has increased by 13.4% year-on-year.

In addition to the CPI, the PPI index also remained at a high level. In August and September last year, Germany's PPI hit a historic increase of 45.8%. Liu Ying, member of the Chongyang Institute for Financial Research at Renmin University of China and director of the cooperative research department, told the 21st Century Business Herald reporter: "Since July 2021, the German PPI has been at a fairly high double-digit level, which will have a negative impact on the CPI. As a result of continuous transmission, despite the rapid decline in PPI, it will still keep German inflation at a relatively high level this year."

In December last year, Germany's CPI dropped to 8.6%, but PPI remained at a high level of 21.6%. Liu Ying believes that Germany still has a long way to go before returning to the 2% inflation target.

Looking forward to 2023, Oliver Rakau, chief German economist at Oxford Economics, said in an interview with a reporter from 21st Century Business Herald, "We believe that German inflation has clearly peaked and will show a downward trend this year. It is expected that Germany's average inflation rate this year will 5% and will fall below 2% in the fourth quarter.”

On January 25, the German Federal Ministry of Economic Affairs and Climate Protection released its annual economic report, predicting that the inflation rate in Germany will drop to 6% in 2023.

Outlook for industrial output remains subdued

As a big manufacturing country, Germany's industrial output has been greatly dragged down by the energy crisis.

According to statistics from the Bureau of Statistics, after adjusting for prices, seasons and working days, Germany’s industrial output in November last year rose by 0.2% month-on-month; after adjusting for prices and working days, industrial output fell by 0.4% year-on-year.

The German Federal Ministry of Economics and Climate Protection said in a press release that industrial output stabilized in November after a weak start in the fourth quarter of last year. Business sentiment has improved and a gradual easing of material shortages is expected to further boost industrial activity in the coming months. However, the outlook for industrial output in the first quarter of this year remains subdued, as evidenced by the current lackluster development of new orders and a slowing global economy.

Liu Ying said, "Germany is a country with a high degree of external dependence, and the weakening of global external demand has a more obvious pull-down effect on the German economy." Taking industrial orders as an example, the data show that after adjusting for seasons and working days last November, Germany Industrial new orders fell by 5.3% month-on-month. Specifically, domestic new orders decreased by 1.1% month-on-month, and foreign new orders decreased by 8.1% month-on-month, of which new orders from the euro zone decreased by 10.3% month-on-month.

Entering 2023, the energy crisis has not subsided, and the business expectations of German companies are still pessimistic. According to a report released by the German Institute for Economic Research (IW) on January 9, 40% of companies expect business to shrink, only 25% expect business to increase, and another 35% expect stagnation . In the industrial sector, 39% of companies expect business to shrink.

The report believes that the risk of natural gas shortage in this winter is no longer as threatening as in the summer of 2022. Energy prices have fallen, but they are still at a high level, and the possibility of production disruption cannot be ruled out.

Liu Ying said that the sanctions and anti-sanctions derived from the conflict between Russia and Ukraine, and the energy crisis have had a great impact on Germany's industrial chain and supply chain. , Germany still has the risk of product outages.”

At the same time, there is also the issue of international competition. Ding Chun said, "Last year, the United States introduced the "Inflation Reduction Act", which caused some energy-intensive enterprises in Europe, especially the chemical industry, to move outward. will have an impact.”

Oliver Rakau believes that German industry will struggle with contraction in the coming months. "In the second half of 2022, factory orders are basically on a downward trend. So while the industrial recession may be milder than expected, we still expect that to materialize," he said.

The IMF expects the German economy to grow by 0.1% in 2023

The data released by the German Statistical Office on January 30 also showed that the price-adjusted GDP of Germany in 2022 will grow by 1.8% year-on-year, which is 0.1% lower than the previously released initial value.

Wei Hongxu, a researcher at the Macroeconomic Research Center of Anbang Think Tank, previously told the 21st Century Business Herald reporter that Germany will maintain positive growth in 2022. First, it will benefit from the decline in energy demand in winter due to climate change, resulting in lower energy prices and the recovery of supply and demand distortions. The second is that the German economy has strong resilience, especially the recovery of the service industry, which has saved the German economy from recession. However, Germany's current high inflation and low growth trend are obvious, showing the characteristics of stagflation.

As the largest economy in the Eurozone, whether Germany will fall into economic contraction this year has attracted much attention. On January 31, the International Monetary Fund (IMF) released the updated content of the World Economic Outlook Report. The IMF believes that Germany will achieve economic growth of 0.1% in 2023, which is much more optimistic than its October forecast, when the IMF predicted that Germany would experience a 0.3% economic contraction in 2023. The OECD also predicted in November last year that Germany would experience an economic contraction of 0.3% in 2023.

According to the annual economic report recently released by the German Federal Ministry of Economic Affairs and Climate Protection, the German government's economic forecast for 2023 is better than the previous autumn forecast. At that time, Germany's GDP in 2023 was expected to decline by 0.4%. The report believes that due to the impact of energy prices and interest rates, the German economy will slow down this year, but it will still achieve economic growth of 0.2%.

Ding Chun believes that this year's German economy should be "suppressed first and then increased". "Because after entering the first quarter, energy problems and high inflation problems will not disappear immediately, and will continue to affect and drag down the German economy. For example, high inflation will drag down private consumption and related investment to a certain extent. At the same time, we must also pay attention to labor shortages, industrial Structural adjustments, the possible relocation of some manufacturing companies, and the uncertainty brought about by the ongoing conflict between Russia and Ukraine will also seriously restrict the development of manufacturing and other related industries."

"However, Germany itself has a good economic foundation and a good financial situation. If the impact of the Russia-Ukraine conflict is controllable and the world economy as a whole is doing well this year, it is still expected to go out of the market that first falls and then rises." Ding Chun added.

Liu Ying believes that "the European Central Bank tightened monetary policy and raised interest rates, further suppressing fragile demand. Germany's consumption, investment, and import and export are not very optimistic. Germany's economy may continue to slow down in the first quarter of this year, combined with the fourth quarter of last year. If the GDP shrinks, the German economy will present a technical recession. However, whether the German economy, which is on the verge of recession, will fall into a substantive recession depends not only on the resilience of the German economy itself, but also on the various pressures it bears on imported energy products. , and the progress of international economic cooperation.”

On February 2, the European Central Bank will announce the latest interest rate decision. At present, the market generally believes that the European Central Bank will continue to raise interest rates by 50 basis points. "In order to curb inflation, the European Central Bank will continue to raise interest rates. Even if the rate and frequency of interest rate hikes last year were not as good as the Federal Reserve, but this week's Super Central Bank Week, the European Central Bank may raise interest rates faster than the Federal Reserve. This will continue to have an impact on German economic growth. Severe inhibitory effect." Liu Ying said.