German business mood good despite declining GDP
The German economy fell more than previously thought in the first quarter, as coronavirus restrictions dampened consumption, but business confidence has since exploded in hopes of a quick recovery, data showed on Tuesday.
After two quarters of growth, GDP fell 1.8% between January and March, national statistics office Destatis said in a statement, revising downward its initial forecast to a 1.7% decline.
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It was well below pre-pandemic levels, with the brakes of Covid-19 causing private consumption to drop 5.4%, data shows.
“Needless to say, the worst quarterly performance of the German economy since reunification was mainly the result of tighter lockdown measures since mid-December,” ING economist Carsten Brzeski said, adding that wintry conditions rigorous and longer than usual Christmas holidays were also factors.
Still, he also added that “the potential for a second quarter surge has increased” as Germany’s vaccination campaign picks up speed and the economy begins to open up after months of locking.
Hopes that Europe’s largest economy would rebound soon after a damaging third wave of the pandemic translated into renewed business confidence in May.
The Ifo Institute’s monthly barometer, based on a survey of 9,000 companies, climbed 2.6 points in April to 99.2 points in May, its highest value in two years.
“Companies were more satisfied with their current business situation. They are also more optimistic about the coming months. The German economy is accelerating,” Ifo chairman Clemens Fuest said in a statement.
The German Bundesbank’s central bank also predicted a rebound in the second quarter last week, saying Europe’s largest economy may even exceed pre-pandemic growth levels from the fall.
The German government forecast currently calls for 3.5% GDP growth for 2021.
GDP fell 5% in 2020, its worst contraction since the financial crisis of 2009, due to the economic fallout from the pandemic.