The German economy grew last year despite inflation, the war in Ukraine and persistent supply problems. Price-adjusted gross domestic product (GDP) rose by 1.9%, according to initial calculations reported by the Federal Statistical Office. In calendar-adjusted terms, it found that economic growth amounted to 2.0%. “In 2022, the overall economic situation in Germany was affected by the consequences of the war in Ukraine and the extremely high energy price increases,” said Dr Ruth Brand, President of the Federal Statistical Office since 1 January 2023, at a press conference. “There also were serious material shortages and delivery bottlenecks, massively rising prices, for example of food, skilled labour shortages, and the continuing though fading COVID-19 pandemic. Although these difficult conditions persist, the German economy as a whole managed to perform well in 2022,” Dr Brand continued. In 2021, the German economy had seen growth of 2.9%.

High prices and shortages of materials hampering industrial production and construction

According to the Federal Statistical Office, in 2022 total price-adjusted gross value added rose by 1.8% compared with 2021. Developments reportedly varied considerably across the individual sectors of the economy: some services sectors had benefited from catch-up effects after almost all coronavirus restrictions had been lifted. According to the experts, a particularly strong increase of 6.3% was recorded for other services, which include the creative and entertainment industries. Transport as well as accommodation and food services had also benefited from the lifting of restrictions. These two sectors were responsible for the strong increase of 4.0% seen in the aggregated economic sector of “trade, transport, accommodation and food services”. Gross value added had declined in trade, however, after having increased the year before. The information and communication sector had likewise recorded a significant increase, of 3.6%.

In the construction sector, by contrast, shortages of materials and skilled labour, high construction costs and worsening financing conditions had led to a considerable decline of 2.3% in gross value added. According to the Federal Statistical Office, the high energy prices and the still limited availability of intermediate products had also hindered economic performance in manufacturing, which hardly increased year on year (+0.2%). As in 2021, manufacturing had been affected by disruptions in global supply chains, especially in the first half of 2022. The situation had been aggravated by the soaring energy prices as a consequence of the war in Ukraine.

Foreign trade picking up

On the demand side, the Office reports that household final consumption expenditure was the main factor supporting growth in the German economy in 2022. It rose by a price-adjusted 4.6% on the previous year and thus almost reached its 2019 pre-crisis level. According to the experts, this was due to catch-up effects after nearly all COVID-19 restrictions had been lifted in the spring of 2022. Households also spent more on recreation, entertainment and culture than they had a year earlier. The Federal Statistical Office views the 1.1% increase in government final consumption expenditure in 2022 as relatively moderate. General government spent significantly more to feed and accommodate all the people from Ukraine and other countries seeking protection, whereas government expenditure to combat the COVID-19 pandemic went down.

According to the Federal Statistical Office, gross fixed capital formation in construction was down by a price-adjusted 1.6% in 2022. The lack of building materials and the shortage of skilled workers mainly affected the construction of buildings and housing. In the course of 2022, the negative trend in gross fixed capital formation in construction was reinforced by an increasing number of order cancellations for commercial and private building projects as construction prices remained high and interest rates in construction were rising.

According to the Office’s data, foreign trade increased in 2022 despite high price rises: German exports of goods and services were up by a price-adjusted 3.2% on the year. Imports had increased much more sharply over the same period – by a price-adjusted 6.7%. Thus, the balance of exports and imports had a downward effect on GDP growth.

New government burdens due to the energy crisis

General government budgets closed with a financial deficit of €101.6 billion at the end of 2022, according to provisional calculations by the Federal Statistical Office. This was a decrease of just under €33 billion compared with 2021. The easing of pressure on government budgets due to COVID-19 measures being phased out was eclipsed by new burdens caused by the energy crisis resulting from the Russian war of aggression in Ukraine.

Initial results on the development of gross domestic product in the fourth quarter of 2022 will be published by the Federal Statistical Office on 30 January 2023. Detailed national accounts data are set to follow on 24 February 2023.