GDP fell 0.2%. The German economy is shrinking again. Germans haven’t saved so much since the last century.
A German economy registered a contraction of 0,2% in 2024, according to data released this Wednesday by the German federal statistics agency (Destatis).
“Conjunctural and structural burdens have prevented better economic development in 2024,” said Destatis President Ruth Brand, adding that these include increased competition for the German export industry in important sales markets, high energy costs, tariffs persistently high interest rates and an uncertain economic outlook.
The gross domestic product (GDP) German falls again. It is the second consecutive year of recession – although the numbers could still change as fourth quarter economic performance is still preliminary.
In 2023, the German economy had already slowed down by 0.3% – 0.1% after adjusting for calendar effects -, while for this year experts predicted, at most, slight growth.
The last time Germany had two consecutive years of recession was more than 20 years.
As companies German companies suffer particularly: gross value added (GVA) fell 0.4% last year. GVA reflects the degree of incorporation of value generated by the company throughout the production process; it is the wealth generated in production – the value of the goods and services consumed to obtain it (raw materials or energy) does not enter the accounts. A company’s GVA measures its contribution to GDP.
Still on the VIB, the industry fell further: 3%, mainly because of problems in mechanical engineering and the automobile.
The industry of construction fell even more sharply: 3.8%. “High construction prices and interest rates have led to the construction of fewer residential buildings,” explained Michael Kuhn from the Federal Statistical Office.
Savings
German consumer spending increased by just 0.2%. THE internal consumption is still below (0.1%) than before the pandemic and was below last year’s inflation (2.2%)
Household disposable income increased. But economic and political uncertainty meant that Germans save more money instead of spending it: the savings rate increased by 1.2 percentage points, now standing at 11.6%.
In fact, according to Peter Kuntze, from the Federal Statistical Office, Germans didn’t save so much 30 years ago – excluding the first two years of COVID-19.
It won’t get better
Speaking of the pandemic, the trust of the businesspeople Germans in the economy is worse off now than it was during the worst phase of COVID, according to a national survey by the Munich Institute for Economic Research.
The economic crisis has led to an increasing number of bankruptcies of companies.
The newspaper summarizes: the German economy is in a permanent crisis.
And, continues the economic newspaper, other countries are moving away from Germany. German exports fell in 2024 and expensive energy and extensive bureaucracy put further pressure on Germany, driving away potential foreign investors.
Germany, which is still the champion of exports in Europe, it depends more on free world trade than almost all other countries. The new tariffs that Donald Trump wants to apply in the USA to European Union products, they must make German products more expensive – which will become less competitive.
And more: the Economists do not expect Europe’s (still) largest economy to recover soon. German production in 2025 is expected to stagnate. German industry is very export-oriented and is not expected to gain much in the coming months.
The Federal Ministry of Economic Affairs is not much more confident: “A remarkable economic recovery in Germany will only begin with clear prospects for future economic, financial and geopolitical conditions” – prospects that do not yet exist.
In the euro zone, GDP is 4% above what it was before the pandemic. In the USA it rose around 12% in the same period. In Germany… 0.1%.
There is a kind of noticeable loss of competitiveness – especially in non-European markets. And the short-term trend is not smiling for Germany.
