German Economy Sees 0.2% Growth in Early 2024

German Economy Sees 0.2% Growth in Early 2024

Key Points:

  • German economy grew by 0.2% in Q1 2024, indicating tentative recovery amid global uncertainties.
  • Household and government expenditures fell by 0.4%, highlighting ongoing economic challenges.

In the first quarter of 2024, the German economy demonstrated modest growth. According to the Statistics Office, the economy expanded by 0.2%, reflecting a tentative recovery amidst global uncertainties.

Household consumption, however, declined 0.4% compared to the previous quarter, highlighting ongoing challenges in consumer confidence. Government expenditure mirrored this trend, also falling by 0.4%, indicating a cautious fiscal approach by the government.

German Economy: Mixed Investment Trends

Investment trends presented a mixed picture. The construction sector saw a positive uptick, with investments increasing by 2.7% from the previous quarter. This surge underscores a continued commitment to infrastructure and housing projects.

Conversely, investment in machinery and equipment dipped slightly by 0.2%, suggesting a cautious approach by businesses in expanding their operational capacities. On a brighter note, exports grew by 1.1%, reinforcing Germany’s strong position in international trade despite global economic headwinds.

Housing Construction Falls by 0.3% to 294,400 Units

The housing sector faced significant hurdles in 2023. The Federal Statistics Office reported that builders constructed 294,400 apartments, marking a slight decline of 0.3% compared to 2022. This figure must be revised to the government’s annual target of constructing 400,000 apartments.

Furthermore, only 260,000 permits were approved, the lowest since 2012, indicating a slowdown in future housing projects. Permits continued to fall into the first quarter of 2024, reflecting persistent challenges in the sector.

German Economy: Berlin Allocates €18 Billion for Housing

Construction Minister Klara Geywitz described the housing numbers as stable, emphasising the role of private companies in affordable housing projects as an “anchor of stability.” Berlin allocates 18 billion euros ($19.51 billion) for affordable housing for recent immigrants, addressing the cost of living crisis.

However, the housing market faces significant issues, including a sudden jump in interest rates, increased building costs, the end of cheap energy from Russia, and bureaucratic red tape, making Germany less attractive than investment opportunities in Britain or France.

Commercial Property Prices Drop 9.6% in Q1 2024

Commercial property prices have also taken a hit, with a 9.6% decline in the first quarter of 2024 compared to the previous year and a 10.2% drop throughout 2023, according to the VDP Banking Association. The backlog of approved but not yet built apartments has fallen for the first time since the 2008 financial crisis, suggesting a potential easing of supply constraints shortly. The Statistics Office’s report offers hope for the struggling housing sector as it strives to meet demand amid economic challenges.