Europe’s largest economy contracted by 9.7% in the second quarter of 2020, compared with the same period in 2019, as the coronavirus pandemic lockdowns drove economic activity to a record quarterly low.
Today’s data shows a slight improvement on the earlier flash GDP reading at the end of July, which had showed a 10.1% contraction in German economic output.
Investments excluding construction fell by 19.6%, exports by over 20% and private consumption by 10.9%. The only growth was in government consumption, which saw an 1.5% quarter-on-quarter increase in the April to June period.
While Germany’s GDP plunge was a record for its economy, it did fare a little better than France, which saw its second-quarter output contract by over 13%. Italy’s economy contracted by 12.4% and Spain’s by 18.5%.
On the year, the German economy has lost 11.3%. GDP is forecast to shrink by more than 6% overall in 2020.
“Looking ahead, it does not take a rocket scientist to predict that the economy will have one of its best quarterly performances ever in the third quarter,” said ING chief eurozone economist Carsten Brzeski, in a note. “All activity indicators point to a continuing increase during the summer months. The VAT-reduction combined with ‘staycations’ should have given private consumption another boost.”
The federal statistics office said in a separate statement on Tuesday that the German state booked a budget deficit of €51.6bn (£46.6bn, $61bn) in the first six months of 2020.
The government will borrow nearly €218bn this year to help the economy withstand the ongoing COVID-19 fallout. It said last week that it will also be forced to borrow more next year too, meaning it cannot reinstate its Black Zero (“Schwarze Null”) debt-brake law for a second year running.
Brzeski added that the current debate over whether to extend the short-time work programme by another 12 months, into 2022, “not only illustrates the government’s determination to offset the fallout from the crisis for as long as possible but also how difficult it will be to eventually exit the crisis measures.”
Some 7.3 million people in Germany were put on short-time hours in May, according to the Ifo Institute, way more than the 1.5 million at the peak of the global financial crisis in 2009. By July, that number had come down to about 5.6 million workers.