Germany’s Q1 GDP figures to indicate recession

The German Federal Statistics Office will release finalised Q1 GDP growth figures today. Germany’s economy is expected to have shrunk

Germanys Finance Ministry Bundesministerium der Finanzen

Photo: Hendel

The German Federal Statistics Office will release finalised Q1 GDP growth figures today.

Germany’s economy is expected to have shrunk by 2.2% from the last quarter, the largest such decline since 2009, officially placing the EU’s largest economy in a recession after it contracted in late 2019. The contraction has been met with a decline in business confidence, measured by the monthly IFO Business Climate Index. Figures from April indicated that a record-high 12.9% of entrepreneurs from Germany’s manufacturing, construction and service sectors expected a negative business outlook in the coming six months, up from 2% in February. The IFO index for May, released today, is expected to show slightly higher business confidence, largely due to a rise in export demand from a reopened Chinese market.

Much of the economic damage has been attributed to a decline in private consumer spending, capital investment and exports. This trend began last year, prior to the COVID-19 epidemic, and was largely precipitated by the decrease in export demand due to the US-Chinese trade war.

German GDP is expected to drop further this quarter, with some estimates predicting a 10% quarterly decline or more. However, private consumption could recover quickly due to Germany’s Kurzarbeit system, which has kept unemployment low (5.8% in April), potentially accelerating the return to full employment in the coming months. Such a recovery and an improving business outlook could signify a modest recovery by the end of 2020.

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