The German economy is shrinking, according to reports, weighing on the market sentiment. Meanwhile, data showed a shrink in the economy of Germany in the third quarter.

According to a Bloomberg report, released on October 30, a threat of recession in the third largest economy of Europe, is said to be due to a fall in the spending urge of consumers in Germany.

Carsten Brzeski, who serves as the head of macroeconomics at ING on a global scale, remarked that the data by itself highlights that the German economy has, at the very least, become one of the slower-growing economies in the eurozone.

Is Germany Heading Towards A Recession?

The Gross domestic product (GDP) fell 0.1% from the previous three months, less than the 0.2% drop economists expected, said the statistics office. 

The shared data also predicted a pullback in household spending, which is why experts labeled Germany as the “Sick Man” of Europe, with a forecasted contraction of 0.03% in the fourth quarter.

Speaking of reasons for this massive economic disaster, besides consumers’ spending, the Ukraine-Russia War is another major reason that has led to a threat of recession in Germany. Notably, Germany’s economy is highly exposed to European countries, which are highly affected by the war, especially in terms of the rise in prices of energy fuels.

Considering the latest data, several analysts fear that the nation is moving toward a recession.

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Nation’s Automobile, Construction Sectors Facing Lump:

Industrial production in Europe’s biggest economy fell 1.5% in June 2023, compared with May, which is continuing in the country. The decline in German industrial output, much steeper than forecast by economists, was no less than a major risk for manufacturing units, leading to a potential recession.

Moreover, the construction sector also was not doing well with a shrank of 2.8%, posing a negative impact on the economy of Germany.

The threat of recession came after the recent emergence in April-June. It is to be noted, that after being highly affected by the Ukraine-Russia war, Germany recently started recovering from a recession in the April-to-June period as gross domestic product (GDP) was flat compared with the previous quarter. However, the fortune of doing well was not long, as once again the nation’s slight fortune in the economy started falling, and now is facing the threat of recession.

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