August 28, 2023

Gross domestic product of Germany: detailed economic performance results for the 2^nd quarter of 2023

Gross domestic product (GDP), 2^nd quarter of 2023
0.0% on the previous quarter (price, seasonally and calendar adjusted)
-0.6% on the same quarter a year earlier (price adjusted)
-0.2% on the same quarter a year earlier (price and calendar adjusted)

WIESBADEN – The gross domestic product (GDP) did not continue to fall (0.0%) in the second quarter of 2023 compared with the first quarter of 2023 after adjustment for price, seasonal and calendar variations. The Federal Statistical Office (Destatis) also reports that the result communicated in the first release of 28 July 2023 has therefore been confirmed. “After slight declines in the previous two quarters, the German economy stabilised in spring,” says Ruth Brand, President of the Federal Statistical Office. Economic performance decreased by 0.4% in the fourth quarter of 2022 and 0.1% in the first quarter of 2023, quarter on quarter.

Final consumption expenditure remained stable compared with the previous quarter

Following two consecutive declines, price, seasonal and calendar adjusted final consumption expenditure in the second quarter of 2023 increased slightly by 0.1% on the first quarter of 2023. After having fallen in the winter half-year, household final consumption expenditure did not continue to drop but stabilised (0.0%). Government final consumption expenditure recovered after some notable declines in the previous quarters and rose slightly by 0.1%.

After the positive development seen in the previous quarter, gross fixed capital formation increased slightly also in the second quarter of 2023. Compared with the previous quarter, gross fixed capital formation in machinery and equipment (+0.6%) slightly exceeded gross fixed capital formation in construction (+0.2%) after price, seasonal and calendar adjustment.

In the second quarter of 2023, total exports of goods and services were down 1.1% from the first quarter of 2023, after price, seasonal and calendar adjustment. By contrast, the imports of goods and services (0.0%) remained unchanged in foreign trade.

Development of gross value added differed across economic sectors

In the second quarter of 2023, the price, seasonally and calendar adjusted gross value added decreased by a total of 0.5% on the first quarter of 2023. Diverging trends were recorded for the individual economic sectors. Economic performance in manufacturing increased by 0.1%. Construction also managed to grow slightly (+0.2%). By contrast, gross value added went down in the aggregated sector of trade, transport, accommodation and food services (-1.4%), in the field of financial and insurance activities (-2.1%) and in public services, education, health (-0.8%). While economic performance remained unchanged in business services (0.0%) and other services (0.0%), gross value added was up 1.1% on the first quarter of 2023 in information and communication.

Gross domestic product down year on year

GDP in the second quarter of 2023 was down a price adjusted 0.6% compared with the second quarter of 2022. The decrease was smaller (-0.2%) after price and calendar adjustment as there was one working day less in the second quarter of 2023 than in the second quarter of 2022.

Substantial year-on-year decline in final consumption expenditure – positive contributions from gross fixed capital formation in machinery and equipment

The persistently high prices continued to have a noticeable effect in a year-on-year comparison. In private consumption, this was particularly reflected by lower expenditure on food and beverages, and restaurant and accommodation services. By contrast, there were positive signs from the transport sector, partly due to more purchases of passenger cars. Overall, price adjusted household final consumption expenditure was 1.2% lower in the second quarter of 2023 than in the same quarter a year earlier. The decline in government final consumption expenditure was even more pronounced (-3.1%). This was due to considerably lower general government expenditure associated with the Covid-19 pandemic, which had mainly consisted of compensation paid to hospitals for free beds and expenditure on coronavirus testing in the same period a year earlier.

The development was heterogeneous for gross fixed capital formation. Capital formation in machinery and equipment increased substantially by 4.4% year on year after price adjustment, which was particularly attributable to the large number of commercial new registrations of passenger cars. By contrast, gross fixed capital formation in construction saw a 0.7% decline on the second quarter of 2022 because of persistently high prices and high interest rates in construction. The decrease would have been even larger without the substantial increase recorded again for building completion work. On balance, gross fixed capital formation was up 1.0% on the same quarter a year earlier. In the second quarter of 2023, domestic uses on the whole were down 0.7% (price adjusted) compared with the second quarter of 2022.

Foreign trade decreased in a year-on-year comparison. Exports of goods and services declined by 1.6% (price adjusted) in the second quarter of 2023 on the same quarter a year earlier. In the same period, an slightly larger decrease was observed for imports (-1.8%). This is mainly due to the substantial decline in goods imports (-4.7%). However, the imports of services were up on a year earlier (+8.0%).

Gross value added down from the same quarter of the previous year

Overall, the price adjusted gross value added in the second quarter of 2023 was 0.7% lower than in the second quarter of 2022.

For services, the aggregated economic sector of trade, transport, accommodation and food services recorded the largest decline (-2.8%). For the first time in more than a year, gross value added showed a negative trend also in public services, education, health (-0.5%). By contrast, there were positive signs from information and communication (+3.0%), real estate activities (+0.7%), business services (+0.5%) and other services (+1.1%).

In manufacturing and construction, the price adjusted gross value added hardly changed in the second quarter of 2023 from the same quarter a year earlier. Economic performance increased slightly in manufacturing (+0.1%) and decreased slightly in construction (-0.1%). Here, the extremely positive development recorded for building completion work limited the decline of the price adjusted gross value added in construction as a whole. In industry (excluding construction), economic performance was down 2.0% compared with the second quarter of 2022. This was mainly due to the substantial drop seen in the energy supply sector from the same quarter of the previous year.

Spring upturn in the labour market weaker than in 2022

The economic performance in the second quarter of 2023 was achieved by roughly 45.9 million persons in employment whose place of employment was in Germany. This represented an increase of 340,000, or 0.7%, compared with the second quarter of 2022. At +0.5% (not seasonally adjusted), the usual spring upturn on the previous quarter was lower than a year earlier. Employment had then increased by 0.7% on the previous quarter (see press release no 326 (only in German) of 17 August 2023).

On average, almost the same number of hours was worked per person in employment as in the second quarter of 2022 (0.0%), although there was one working day less in the second quarter of 2023 than a year earlier. The labour volume of the overall economy – the higher number of persons in employment multiplied by the number of hours worked per person in employment – was up by 0.8% in the same period. This is shown by provisional calculations of the Institute for Employment Research (IAB) of the Federal Employment Agency.

Overall labour productivity (price adjusted GDP per hour worked by persons in employment) fell 1.4% on the same quarter of the previous year, according to provisional calculations. Labour productivity per person in employment was also 1.4% lower than in the second quarter of 2022.

Income and consumption expenditure increased sharply, savings ratio up year on year

At current prices, GDP rose by 6.5% and the gross national income by 6.9% in the second quarter of 2023 compared with a year earlier. Net national income at factor cost was up 7.4% on the second quarter of 2022. According to provisional calculations, the compensation of employees rose by 7.1%. Property and entrepreneurial income increased by 8.3%. There was a corresponding rise of 6.7% in average gross wages and salaries per employee in the second quarter of 2023 from the same quarter of the previous year. Net average earnings increased even more (+8.7%) due to the weak development of wage tax revenue. Apart from another decline in the volume of short-time work, the main contributing factors probably were tax-free premiums paid to compensate for inflation and higher wage settlements agreed in view of the rising overall price level. In addition, the statutory minimum wage was raised in October 2022, which led to overproportionate increases in the average earnings of marginally employed persons. Compared with the markedly higher average earnings, the increases of social contributions were smaller because, among other things, the premiums paid to compensate for inflation were not subject to social contributions.

Total gross wages and salaries rose by 7.6% on a year earlier as the number of employees also went up once more. At +5.7%, the year-on-year increase in household final consumption expenditure at current prices was considerably smaller than in the previous quarters. The disposable income rose by 6.9%. The savings ratio amounted to 11.1% in the second quarter of 2023 and was therefore slightly higher than in the previous year (10.3%).

Germany’s economy compared internationally

Like in Germany, the economic development stagnated in the European Union (EU) as a whole in spring 2023. However, there were differences regarding the other large EU Member States. The largest quarter-on-quarter increases in the price, seasonally and calendar adjusted GDP were seen in France (+0.5%) and Spain (+0.4%) in the second quarter of 2023. By contrast, economic performance declined by 0.3% in Italy. At +0.6% quarter on quarter, the economic development was somewhat better in the United States (USA) than in most European countries. Compared with the same period a year earlier, Germany (-0.1%) ranked clearly below the EU (+0.5%) in terms of economic development.

Source: DESTATIS
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