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Germany Falls Into Recession as Consumers in Europe's Biggest Economy Spend Less (cnn.com) 116

Posted by msmash from the growing-concern dept.
Germany has slipped into recession as last year's energy price shock takes its toll on consumer spending. From a report: Output in Europe's largest economy dropped 0.3% in the first three months of the year, following a 0.5% contraction at the end of 2022, official data showed Thursday. The Federal Statistical Office downgraded its previous estimate of zero growth in gross domestic product (GDP) compared with the previous quarter. A recession is defined as two consecutive quarters of declining output.

"The persistence of high price increases continued to be a burden on the German economy at the start of the year," the office said. "This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023." Claus Vistesen, chief euro area economist at Pantheon Macroeconomics, said spending by consumers in the first quarter was crimped by "the shock in energy prices."
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Germany Falls Into Recession as Consumers in Europe's Biggest Economy Spend Less More

Germany Falls Into Recession as Consumers in Europe's Biggest Economy Spend Less

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  • Thanks Putin (Score:4, Informative)

    by rsilvergun ( 571051 ) on Thursday May 25, 2023 @10:04AM (#63550241)
    This is why dictators suck. That's why authoritarianism sucks. Their economic policies don't work even when they're not just stealing all the money for themselves and their cronies. So they make a mess of everything.

    I'm saying this because America has a strong authoritarian streak going on right now with several authoritarian politicians running for the White House. We need to keep this in mind. If you like those guys in this will be us in a few years only worse.

    • Re: (Score:2, Troll)

      by gweihir ( 88907 )

      A lot worse. German infrastructure, for example, is mostly in good shape and this is not a very serious recession in the first place. It just about fulfills the criteria to be called this at all. Something like a budget crisis is not happening in Germany, while the US seems to be going close to the brink there, again.

      • The US coming to the brink, over and over again, is the political parties playing chicken with the American public in the name of outrage. Brinksmanship, finger-pointing, and constant battles over shit that everybody should agree on is the best way for them to avoid doing any real work and spend most of their time fostering bitterness and gathering paychecks off the back of that bitterness.

        It's manufactured nonsense that could, if they play the game to its conclusion, cause not just decimation in the states

        • Re: (Score:2)

          by gweihir ( 88907 )

          In part, yes. But you can only manufacture this type of crisis if things are not too well overall.

          • In part, yes. But you can only manufacture this type of crisis if things are not too well overall.

            Or if you take literal decades to grind everything under your heel until you can jerk the economy around by the nose like a bull with a ring and chain. Politicians here love to play brinkmanship with the economy. It's why we have that whole debt limit breakdown every year or more. Keeps the economists on their toes, prognosticating thermonuclear economic winter for the plebes while Wall Street whines that they lost a quarter after only making a few billion more.

            • Re: (Score:2)

              by gweihir ( 88907 )

              In part, yes. But you can only manufacture this type of crisis if things are not too well overall.

              Or if you take literal decades to grind everything under your heel until you can jerk the economy around by the nose like a bull with a ring and chain.

              Indeed. I would file that under "things are not too well overall" though.

      • Comment removed based on user account deletion

        • Re: (Score:1)

          by dbialac ( 320955 )
          Like it or not, we're going to find out the hard way that we need fossil fuels. Germany is learning that for sure because as they've shut down all of their nuclear plants, they don't have a lot of other options at night that except hydroelectric. Battery production causes a ton of CO2 and enables child labor in Africa, so you don't really get any benefit there.
          • Comment removed based on user account deletion

            • Re: (Score:2)

              by dbialac ( 320955 )
              I don't need the fossil fuel industry to point out that German has reactivated fossil fuel plants because they shut down their nuclear infrastructure. Also, LMK when there's enough cobalt not coming out of Zimbabwe. I managed to figure that out without reading anything from the fossil fuel industry. Maybe you should start reading actual news rather than just ones that confirms your prejudices rather than reality when it's inconvenient.
        • They're making record profits so that's what's eating into everyone's disposable income

          Ya know, when I hear people from Germany say they open the windows in the middle of winter to air out their house or because it's too warm, I don't want to hear how it's an energy company's fault.

          The same goes for other countries, including Nordic, who do the same thing.
          • ...why wouldn't you open your windows when it's too warm? That's a perfectly normal thing to do in Germany's climate.
            • ...why wouldn't you open your windows when it's too warm? That's a perfectly normal thing to do in Germany's climate.

              In the middle of winter? If your place is too warm the solution is not to open the windows and let all that heat out after you just paid to heat your place , the solution is to turn down the thermostat.

              Unless you're being sarcastic.
              • Many more people in Europe live in apartments rather than single-family houses, and many of those apartments are heated with boiling water and radiators, which often can't be adjusted by the individual(s) within the apartment. That setup isn't unheard of here in the States either, but I believe it is far more common there.

                • >Many more people in Europe live in apartments rather than single-family houses, and many of those apartments are heated with boiling water and radiators, which often can't be adjusted by the individual(s) within the apartment. That setup isn't unheard of here in the States either, but I believe it is far more common there.

                  While I've very old commercial/school radiators that can't be adjusted, I've never seen residential radiators that can't be adjusted via a tap located where the radiator connects to th

              • "OR because it's too warm"

                Uh...maybe because of this? *You* wrote that. There's no "in the middle of winter" in it.

                If your place is too warm the solution is not to open the windows and let all that heat out after you just paid to heat your place

                Great straw man! People's places aren't always hot just because of too much artificial heating.

            • Re: (Score:2)

              by Bert64 ( 520050 )

              Not in the middle of winter, if it's too warm its because you are wasting too much energy heating it.

              • Who said anything about middle of winter? I just wrote "when it's too warm", just like in the comment I was responding to. Did you somehow get the impression that winter in Germany is warm? Usually summer is warm.

                • Re: (Score:2)

                  by Bert64 ( 520050 )

                  Read the comment you responded to again...

                  Ya know, when I hear people from Germany say they open the windows in the middle of winter to air out their house or because it's too warm,

                  He explicitly said "middle of winter".

          • Comment removed based on user account deletion

          • Re: (Score:2)

            by gweihir ( 88907 )

            And where did you fantasize hearing that, at least the "too warm" part?

            Briefly opening your windows for fresh air is not an issue, incidentally, the SHC of air is pretty low. What you may have heard here (but obviously not understood) is the official advice that it is better and costs less energy to briefly open your windows fully than to let in a bit of air all the time.

      • Re: (Score:2)

        by dbialac ( 320955 )
        Germany builds their autobahn to last decades longer than the US, and most other countries, do. The autobahn is an amazing road to drive in because of this. It has zero bumps on it and despite that fact, the Germans think parts of it are terrible. We don't want to spend that kind of money to build a road.

        • Wait. What? I've driven a bunch, but never seen road bumps in a developed country unless in pedestrian zones.

          Isn't it the governments' task to provide proper infrastructure? Isn't that why there's road taxes?

          • You may or may not consider the U.S. to be a developed country (IMO "post-developed" is probably the most accurate description).

            But, tn parts of the U.S., including Northeast Ohio where I live, the combination of frequent freeze/thaw cycles, and the use of road salt, cause even the best-built roads to degrade quickly. The results can be potholes big enough to swallow cars and small trucks.

            Many major U.S. cities including Chicago, Detroit, and New York, have similar climates, and thus experience the same is

            • Re: (Score:2)

              by dbialac ( 320955 )
              I've seen them in Florida, but not to anywhere near the extent that I encounter them up north. In Florida I've generally just encountered areas where asphalt has peeled off the next layer of asphalt.
    • Putin is a major cause of this certainly. But Germany has also taken multiple steps which did not help matters. The most obvious being turning off their nuclear plants. And then going ahead with that plan even after the war in Ukraine had already disrupted their fossil fuel access and made even more clear what getting gas from Russia was itself doing. It is likely that Germany would still be in a recession even if their nuclear plants were operating, but it certainly isn't helping matters.

    • Sorry, but unless I'm missing something completely, your statement is ...borderline nonsensical.

      1) there is no dictator in Germany.
      2) Germany is not an authoritarian state
      3) Germany really isn't a kleptocracy, as you imply
      4) what the hell does Putin have to do with the economy of Germany? That is, aside from having a disproportional control-level on their (and by extension, all of EU's) economy due to dangerously dependent, short sighted energy policies that were driven by Leftist 'oh Russia ain't as bad a

    • This is why dictators suck. That's why authoritarianism sucks. Their economic policies don't work even when they're not just stealing all the money for themselves and their cronies. So they make a mess of everything.

      I'm saying this because America has a strong authoritarian streak going on right now with several authoritarian politicians running for the White House. We need to keep this in mind. If you like those guys in this will be us in a few years only worse.

      OK in all fairness, Pritzker and Newsom haven't YET announced they're running, even though it's widely expected.

    • Comment removed based on user account deletion

  • Define Irony (Score:3)

    by mseeger ( 40923 ) on Thursday May 25, 2023 @10:16AM (#63550271)

    The irony is that today the gas prises have reached it's lowest level since summer 2021. It is down more than 90% from the peak in 2022.

  • "Falls into recession"? Seriously? Yes, formally this is a "recession", but effectively just business as usual with some minor deviations. Even the gas-prices are dropping and electricity should become cheaper as well with the warm weather as France is not sucking the European electricity market dry because it is cold and its nukes are down.

    • Re: (Score:2)

      by waspleg ( 316038 )

      year on year is over 7% inflation, and that's lower than most of the rest of their EU constituents - UK is more like 10%. Yea, that's down from 7.9% in January for Germany, but still bad.

      I'd also wager but don't know, they cook their numbers the same as the US - which means actual inflation of everything is likely higher than what official sources say.

    • France has been net exporter of electricity for the last 50 years. Except for a small part of 2022. Seems a bit far-fetched to be willing to lie all the blame on them. Unless you have a hidden agenda of course.

      Funnily enough, you never heard/hear the french complaining when they had/have to compensate for the intermitency in Germany electricity production.

  • deflation myth (Score:5, Insightful)

    by roman_mir ( 125474 ) on Thursday May 25, 2023 @10:53AM (#63550339) Homepage Journal

    As you can observe here, the real reason people spend less is inflation (printing, increasing money supply) and the resulting growth of prices. So many economic illiterates insist that deflation, and the resulting fall in prices causes people to value money more and to delay spending. The only spending that may be delayed under deflation is investment spending, people are more careful about throwing money on risky enterprises with unclear returns, however deflation and the resulting fall in prices would not lead to people delaying their day to day spending. People spend more when they see good deals, that is why people look for sales and bargains and they then spend. People even use credit abd thus pay more potentially for something they want to buy right now.

    However inflation and the resulting rising prices cause people to spend less because they basically cannot afford all of the things they wish to buy in an economy that is constantly repricing goods and services up. This is the failure of understanding of economics and behavior and reality displayed by the modern 'economists' (mouthpieces of the political class) and of the brainwashed population, that believes in fairy tales, in government and central bank tales of 2% inflation targets and their ability to "cool" or to "heat" the economy.

    People spend less when things cost more. Things cost more in inflation. Politicians live on inflation. Goals of politicians and of the government machine and of ordinary citizens are not aligned at all, not even close.

    • Re:deflation myth (Score:4, Insightful)

      by nagora ( 177841 ) on Thursday May 25, 2023 @12:10PM (#63550479)

      Unfortunately those "economic illiterates" have been the mainstream school of economic thought for decades and are in charge of the world's central banks. No amount of evidence from the real world shifts them from this delusion - consumer electronics and even cars have shown that deflation encourages optimism and spending; even the industrial revolution and the creation of mass production itself is not enough to make these morons stop beliveing their models and start paying attention to what actually happens.

      Meanwhile, they are completely unable to point to an example where deflation caused recession on anything like the scale of their own mistakes, or at all really.

      "Models over facts" is the modern economic mantra.

    • " Goals of politicians and of the government machine and of ordinary citizens are not aligned at all, not even close."
      Well... since the French revolution, European politicians tend to be a bit more carefull in these regions. Sure, there is plenty to complain about, but American politicians seem to be a different breed than those here. Jaw dropping! Worst part is that we are sloooowly sliding towards American style politics.
      Vive la résistance!

    • Re:deflation myth (Score:5, Insightful)

      by DarkOx ( 621550 ) on Thursday May 25, 2023 @01:23PM (#63550643) Journal

      ^THIS

      When you go to the grocery store and see the prices go up every week you don't run out spend all your savings because you think it will buy less later. Normal people increase their savings rate for fear they won't be able to afford groceries out of cash flow at some future point.

      Deflation same deal if you see prices continuing to fall you tend to think I hey that's a good deal and I can finally afford one of ... i am going eat beef this week instead of chicken.. Most people don't go gee I am buy rice and beans again because maybe i'll be able to afford fillet in year or so.

      As Roman_mir points out it probably does delay large capital investments the way a lot of economists seem to think it should. The actual behavior at the GDP level is going to depend on how much of the economy is nominally consumer spending, basic material, producer products/finished goods.

      • Re: (Score:2)

        by rossdee ( 243626 )

        " Normal people increase their savings rate for fear they won't be able to afford groceries out of cash flow at some future point."

        Where does the extra money come from? You're have to pay out more each week/month for essentials so you have less available to save.

        • People buy fewer luxuries, and try to find better deals on the things they absolutely can't go without.

          Unless of course they were already too broke to not have already been doing these things all along. In that case, they often end up drawing down their savings and/or going into debt.

          I'm in the latter position, but, fortunately, did have some savings, and minimal debt, until recently.

      • you clearly never lived in a place with hyper inflation, when you have 10% annualized, in some places people may postpone even essential purchases and try to increase their savings, but in places that have a history of hyper inflation or are currently at hyper inflation, like 10% a month, it is very common for people to spend everything as soon as they receive the money, because the next day they will not be able to afford the same amount, and this behavior sticks with people, where I live it still not that

    • that's too simple. Our economies are growing. If you don't print you get a deflationary spiral.

      The problem is what we're doing with the money we print. Most of it is going to the top. In America it's nearly all, not sure about Germany's numbers but I can't imagine they're great.

      Companies then take the money we give them and use it to buy up competitors. Once they have a defacto monopoly they jack up prices. Hence inflation.

      You can see economists starting to talk about it. Google "price-profit sp

      • rsilvergun is one of the economic illiterates, he believes inflation is created by companies buying their own and others stock, in the same paragraph he actually gave the reason for the purchases: cheap money, printed by the government, accessible to corporations.

        I don't know what he believes money that governments print should go to, probably he wants to access the money himself first, thus he would buy himself a moving vehicle.

        In any case, there is no such thing as 'deflation spiral', has never happened,

  • Inflation, Ukraine War, Demographic Tilt, Peak Digital, AI, etc ... the whole nine yards of (relative) recession and massive economical shifts.

    Electricity prices have doubled, all parts of everyday purchases are heavily influenced by inflation.

    I've been flying under the radar and actively living minimalist since the 2007 recession - which suits me well - so I don't sweat it, but all the factors mentioned above see budgets being cut and trimmed down left, right and center, big and small. My last gig consolid

    • I've tried to do that, but I have a wife and 4 kids all of whom grew up in relative comfort, and they are struggling to adapt to the reality that's sinking in that unless we practice financial restraint voluntarily right now, we will be forced by circumstances to do so involuntarily in the not too distant future.

  • Maybe they shouldn't shutdown nuclear (Score:3)

    by atomicalgebra ( 4566883 ) on Thursday May 25, 2023 @11:14AM (#63550383)
    Nuclear energy provided clean low cost electricity which helped drive their economy. Their energy costs are up significantly which put them into a recession.

    • Re: (Score:2, Informative)

      by djgl ( 6202552 )

      Uh, no. The price didn't rise when we shut down the remaining nuclear reactors this year:
      https://www.smard.de/en/marktd... [smard.de]

      The price peaked in August and utilities try to compensate the loss they made back then by keeping the price high now that they can buy electricity for cheap.

      • Prices peaked because you decided to base your entire economy off of russian gas and coal. And you had shutdown 14/17 reactors before August. So enjoy your coal fumes fucktard.
    • Here we go again... Not choosing for nuclear power is the cause of downfall of society. Why not take a few steps back? Tune the speed of the economy on the natural energy resources that are available. Low sun, little wind? Companies move to slow speeds. Do maintenance, people take holidays, get on temporary unemployment. Time to build your own home, renovaten ... . Shift to administration tasks, could be even government work. Much energy? Crunch time!
      Sure, you'd have to wait for good weather to get your G

    • Nuclear energy provided clean low cost electricity which helped drive their economy. Their energy costs are up significantly which put them into a recession.

      Any energy cost can go up when you fundamentally alter the supply. Nuclear is no exception for a company like Germany which has zero production of the raw resource and would be 100% reliant on energy imports.

      By suggesting they should swap one for another you show you fundamentally do not understand what is going on in the world and what caused the crisis in the first place.

      • Wow you're dumb. Nuclear is a low cost energy source. Germany swapped it out for coal and russian natural gas. When russia invaded Ukraine gas costs exploded. If they kept their nuclear open their costs would be less. And you lack a fundamental understanding of basic economics.

  • Not a "Technical Recession" this time? (Score:5, Interesting)

    by khchung ( 462899 ) on Thursday May 25, 2023 @12:10PM (#63550477) Journal

    A recession is defined as two consecutive quarters of declining output.

    Yeah, when that happened to America in last year, it was called a "Technical Recession" [cnn.com] by the very same CNN, "Some economists call two consecutive quarters of contraction a technical recession", as if it was some "technical" glitch which isn't real.

    But now that it happened in Germany, it is just straight up "Recession". Typical double standard from American media.

    • Re: (Score:2, Insightful)

      by cayenne8 ( 626475 )

      Yeah, when that happened to America in last year, it was called a "Technical Recession" [cnn.com] by the very same CNN, "Some economists call two consecutive quarters of contraction a technical recession", as if it was some "technical" glitch which isn't real.

      But now that it happened in Germany, it is just straight up "Recession". Typical double standard from American media.

      That's what happens with the current party in power pretty much "owns" the media here in the US.

      They will NOT say bad things about

      • Re: (Score:2)

        by skam240 ( 789197 )

        They will NOT say bad things about the Biden administration or Dem. policies and where it has been leading us these past years.

        What world do you live on? Just because all media companies arent far to the right of center like Fox news doesnt mean big media isnt critical of the democrats.

        • What world do you live on? Just because all media companies arent far to the right of center like Fox news doesnt mean big media isnt critical of the democrats.

          They do NOT criticize the Biden administration, nor the policies they've put forth...they do not ask critical questions, and hell...they even play along with the few press conferences with Biden himself, asking the pre-selected/approved questions given them when Biden calls on them from his detailed notes (which spell out the questions coming to him

          • Re: (Score:2)

            by skam240 ( 789197 )

            I think you're just upset that not-Fox News networks dont hit all the far right talking points you want them to as I see plenty of news critical of the Democrats. I was just watching a segment the other day on the PBS News Hour on immigration that was pretty critical of Biden just as one example off the top of my head.

    • Typical double standard from American media.

      If I called you an idiot would you agree that this would be double standards for Slashdot since we both comment here? Both the current article and the one you linked are not only written by different people, they were written by different departments within CNN, on different continents on the planet.

      There is no double standard for American media here. One of them isn't even American, unless CNN has an office in London, Ontario, at least then technically they'd be on the same continent.

  • A big factor people are overlooking is that the service and financial sector is still growing while manufacturing continues its decline. Look up the German DAX and Services PMI and contrast them with its Manufacturing PMI. The latter has practically shrunk back down to pandemic-era levels.

    There has been a shift in the German economy as it prioritizes services and finances over heavy industries. The war in Ukraine merely sped that process up, perhaps a bit too quickly I would argue. Getting cut off from both

  • German made stuff is still in demand.
    It's just that Germans are not buying them in Germany.

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