German economy recovers at record pace in third quarter
The German economy bounced back in the third quarter by more than previously thought, with gross domestic product (GDP) growing at a record rate of 8.5% compared with the second quarter, according to revised figures from the Federal Statistics Office.
The recovery, powered by private consumption, exports, and investment, followed a big second-quarter decline of 9.8% due to lockdowns.
The July-to-September quarter was when restrictions were all lifted and Germany was back to almost normal business, bar a ban on large events and the usual distancing measures.
The Statistics Office revised its third-quarter GDP estimate up to 8.5%, from the previous flash estimate of 8.2%.
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A serious second wave of the virus has caused COVID-19 infections to surge to record daily highs in Germany in the past couple of months, and the current partial-lockdown is likely to be extended from initially the month of November, to 20 December.
Chancellor Angela Merkel will meet heads of the 16 states on Wednesday (25 November) to discuss an extension of the ‘lockdown light’ as it has been billed. The government has earmarked €10bn (£9bn, $12bn) to help businesses forced to close this month, but critics have said the stimulus is not enough.
“Even without tighter restrictions, the extension of the lockdown will make a double-dip, ie a contraction of the economy, in the final quarter of the year inevitable,” Carsten Brzeski, ING’s global head of macro, said in a note.
“The only hope for the economy to avoid a contraction comes from a surprisingly strong manufacturing and export sector.”
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The financial hit to restaurants, bars, hotels, entertainment and sports venues could well cause another economic contraction in the fourth quarter of 2020.
Experts are predicting an overall GDP drop of just over 5% this year, while the government in its most recent forecast said it expected a decline of 5.5%.
WATCH: Eurozone business activity shrinks
