Germany’s Economy Shrank in 1Q and Entered Recession, Confirming First Estimate
The German economy posted its largest decline in output since the financial crisis in the first quarter and entered a recession due to the coronavirus pandemic and the lockdown implemented in mid-March, the German statistics office Destatis said Monday, confirming a preliminary estimate.
As previously reported, gross domestic product–the broadest measure of goods and services produced in an economy–contracted 2.2% in the first quarter compared with the previous quarter. GDP fell 2.3% on year in the first quarter on a calendar and price-adjusted basis, Destatis said, confirming the first estimate.
This is the second largest decrease since German unification, following a 4.7% decline in the first quarter of 2009, Destatis said.
Household final consumption decreased an adjusted 3.2% and fixed capital formation in machinery and equipment declined 6.9%. Government expenditure rose 0.2% and fixed capital formation in construction increased 4.1%, preventing an even larger GDP decrease.
Foreign trade also declined due to the coronavirus. According to provisional calculations, exports were down 3.1%, after price, seasonal and calendar adjustment. While exports of goods decreased 4.0%, exports of services increased 0.7%. Imports of goods and services were down 1.6%.
The lockdown started in Germany on March 22 and was less stringent than in other eurozone countries. Economists expect to see a sharper GDP contraction in the second quarter. With the German economy starting its gradual reopening on April 20, a larger chunk of second-quarter output will be lost than in the first quarter.
Roughly 45 million people were in employment in the first quarter, an increase of 147,000 people or 0.3% on year. Such a small year-on-year increase had last been observed in the second quarter of 2010, Destatis said.
One of the reasons why the pandemic had only a moderate impact on the number of persons in employment in the first quarter is that short-time workers are counted as persons in employment, Destatis said.
Northern European countries, by and large, shrank far less than its Mediterranean counterparts. The Dutch economy contracted 1.7% in the first quarter, while the Italian economy declined 4.7% during the first quarter, France posted a historic contraction of 5.8% and the Spanish economy plunged a record 5.2%, according to preliminary estimates.
Source: Dow Jones