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 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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