German Economy Rebounds Strongly In Q3

The German economy rebounded strongly in the third quarter from the historic slump caused by the coronavirus pandemic, and the pace of growth exceeded expectations, preliminary data from Destatis showed Friday.

Gross domestic product grew 8.2 percent quarter-on-quarter, reversing a 9.8 percent fall in the second quarter. This was also faster than the expected growth of 7.3 percent.

Underpinned by consumer spending, investment in equipment and a sharp rise in exports, the economy ended the severe recession that was caused by the impact of the coronavirus, or Covid-19, pandemic and subsequent lockdown restrictions.

However, Destatis said GDP was 4.2 percent lower compared to the fourth quarter of 2019, the quarter before the global corona crisis.

Year-on-year, the price-adjusted GDP fell 4.1 percent in the third quarter, much slower than the 11.3 percent decrease seen in the second quarter and a 5.2 percent fall economists’ had forecast.

Likewise, GDP, adjusted for calendar effects, declined 4.3 percent annually after easing 11.3 percent.

The statistical office is set to publish detailed results for the third quarter on November 24.

The International Monetary Fund forecast Germany’s GDP to contract 6 percent this year, but to recover next year with a 4.2 percent growth.

In the monthly report released Monday, Bundesbank said the economic recovery is likely to continue in the current quarter, albeit at a much slower pace.

The ‘lockdown 2.0’ still tries to spare industry but given that many parts of the service sector will now be closed for at least four weeks, there is a risk that despite new government support of some EUR 10 billion, unemployment and insolvencies will increase, Carsten Brzeski, an ING economist said.

Add to this second or third round effects and probably more lockdowns in other European countries and a double-dip looks unavoidable, the economist noted.

The government forecast the economy to shrink 5.5 percent this year, before expanding 4.4 percent in 2021. For the year 2022, an increase in economic output of 2.5 percent is expected.

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