global economy

Germany revises up Q3 2020 economic growth

Agence France-Presse, Agence France-Presse
Germany revises up Q3 2020 economic growth

ECONOMIC ACTIVITY. People stand in front of a cinema in the city of Munich, Germany, on October 30, 2020, amid the COVID-19 pandemic.

Photo by Christof Stache/AFP

The record increase in Germany's gross domestic product in the 3rd quarter of 2020 is driven by a jump in private consumption

Germany’s economy grew by a better-than-expected 8.5% in the 3rd quarter, revised data showed on Tuesday, November 24, powered by household spending as the country emerged from tough coronavirus lockdowns earlier this year.

The record increase in gross domestic product (GDP) beat the preliminary estimate of 8.2% quarter-on-quarter growth announced in October, federal statistics agency Destatis said.

Private consumption jumped, Destatis said, partly thanks to a temporary reduction in value-added tax to the end of the year, alongside a 300-euro ($356) bonus per child for families as part of the government’s stimulus package. 

A sharp rise in exports and investment in machinery and other equipment also fueled the recovery over the summer months.

The growth could “offset a large part of the massive decline in GDP recorded in the 2nd quarter” due to the pandemic, Destatis said. 

Between April and June, when Europe’s top economy was hit by shutdowns of businesses and factories, GDP plunged by a record 9.8%.

But the lifting of restrictions allowed for a strong rebound as consumers returned to shops and manufacturing restarted.

“Once again, it’s a positive surprise” said Jens-Oliver Niklasch, analyst for LBBW bank, adding that it was “clearly consumption-driven recovery.”

However, “the risk of another setback in the final quarter of 2020 due to the ongoing lockdown is quite high,” he said. 

Germany is currently in the midst of new measures to curb the spread of a second wave of the virus, with the government predicting just 0.4% growth in the final quarter. 

Overall, the government expects the German economy to shrink 5.5% in 2020 before rebounding by 4.4% in 2021.

Chancellor Angela Merkel will meet on Wednesday, November 25, with regional leaders to decide on expanding restrictions, with any extension making “a double-dip, a contraction of the economy, in the final quarter of the year inevitable,” ING bank analyst Carsten Brzeski said. – Rappler.com