Germany’s economy is stagnating. And these 5 charts show how

With Germany already in a technical recession, economists predict that GDP growth is set to stagnate for the rest of the year and have painted a gloomy picture for Europe’s largest economy.

In May, the German statistics office revised its first-quarter GDP readings from zero to -0.3%, which followed a 0.5% contraction in the last quarter of 2022.

But a faltering gross domestic product isn’t the only figure that suggests that the German economy is stuttering.

Here are five charts that show how the historical engine of Europe is faring.

The consumer price index measures the average change in the price of goods and services purchased by consumers, and is a solid indication of monetary value trends.

Germany’s inflation rate is expected to hit 6.4% for June, according to provisional data from the German statistics office, which is an increase from the 6.1% recorded for May. Despite the projected increase, the figure is still a significant decrease from its near-50-year high of 8.8% in October, but remains well above the country’s 2% target.

“It looks like, for at least the next couple of months, inflation will stay on very high levels. Expect maybe for the second half that inflation might come down to a certain extent,” Joachim Nagel, president of Germany’s central bank, the Bundesbank.

While inflation may start to sink, Germany’s central bank estimates that it won’t reach 2% until at least 2025. German consumers have felt the impacts of long-lasting high inflation as they’ve had to make their euros stretch further, but the financial pressure on households doesn’t look set to ease any time soon.

Germany’s place in the euro zone means that its interest rates are determined by the European Central Bank, giving the country limited autonomy when it comes to tackling sticky inflation.

The government introduced multiple relief packages in 2022, designed to help Germans cope with the rising cost of living brought about by high inflation, including increased child benefits and one-off payments for students and pensioners.

The European Central Bank has consistently raised rates since July 2022 as it attempts to bring down inflation across the region, and the main rate currently sits at 3.5% after a further 25-basis-point hike on June 15.

The current bout of inflation can largely be attributed to high global energy prices, which came as a result of pent-up pandemic demand followed by a post-pandemic recovery. Russia’s full-scale invasion of Ukraine then brought huge uncertainty to the market and caused a further spike in prices.

While some energy sources are starting to settle to their pre-war prices, the energy crisis is continuing to impact some of Germany’s biggest industries.

“Energy intensive industrial production is reduced substantially. The automobile sector [has also been] having difficulties for some time and substantial restructuring is still ahead,” Endowed Chair of Monetary Economics at Goethe University in Frankfurt, Volker Wieland.

Utilities costs are still expected to increase in 2023, according to a January report by Allianz. Electricity bills are expected to increase by around 35% this year, while industrial power prices are set to rise by around 75%, the report said.

German exports unexpectedly nudged lower in May, coming to a total of 130.5 billion euros ($142 billion), which is a 0.1% drop compared to April, according to provisional data by the German statistics office. Analysts polled by Reuters had anticipated a 0.3% uptick month-on-month after April export figures surprised to the upside.

“The global interest rate hikes are naturally also dampening demand for products from Germany,” Veronika Grimm, professor of economics at Friedrich-Alexander-Universität Erlangen-Nürnberg.

But the fall in exports may not be as bad as the headline numbers suggest, S&P Global Ratings’ Broyer, and he attributed the dip to a price effect reflecting factors such as the recent lower cost of energy.

“The foreign trade figures for May show that the terms of trade are continuing to recover. The German economy has already recouped half of the losses in terms of trade incurred over the last two years and the energy crisis,” he added.