Germany's economy experienced a slight contraction in the third quarter, according to data released on Monday. This was primarily attributed to factors such as weak purchasing power and increased interest rates, which continued to weigh down Europe's largest economy.

The Federal Statistics Office reported a 0.1% decline in Gross Domestic Product (GDP) on a quarter-on-quarter basis, after adjusting for seasonal variations. This figure was better than anticipated, as a Reuters poll had predicted a 0.3% contraction.

Notably, the statistics office revised the second-quarter data, now showing a modest 0.1% expansion instead of the initial stagnation. The first-quarter figure was also adjusted to reflect stagnation, rather than a previous contraction that had contributed to the economy entering a recession. A recession is officially defined as two consecutive quarters of negative GDP growth.

In the third quarter, household consumption declined due to persistent high inflation, which eroded consumers' purchasing power. However, there is an expectation of a decrease in Germany's headline Consumer Price Index (CPI) in October, mainly due to base effects related to food and energy prices. Inflation data for the month will be released later on Monday.

On a more positive note, capital investment had a favorable impact on GDP, as reported by the statistics office.