German Economy Shrinks 10.1% in Q2, but It’s Not All Bad News

Read also: EU Leaders Seal the Deal on $2.1 Trillion Coronavirus Recovery Fund

Altmaier said he expects the German economy to return to growth in October.

For the whole of 2020, his ministry forecasts that German output will contract by 6.3 percent before expanding by 5.2 percent in 2021.

By contrast, the European Commission expects the economies of France, Italy, and Spain to shrink more than 10 percent this year.

Second wave fears

Better-than-expected business and consumer confidence surveys recently suggested Germans are feeling more optimistic about the future.

But concerns have grown over a spike in Covid-19 cases at home and across Europe, partly fuelled by summer travel.

As an export powerhouse, Germany is highly vulnerable to virus setbacks in other countries that could lead to renewed shutdowns that once again disrupt supply chains and suppress demand.

In April and May, at the height of the global lockdowns, German exports plummeted around 30 percent year on year.

Germany's mighty industrial sector, already feeling the pain from US-China trade tensions and Brexit uncertainty, has been especially hard hit.

Car manufacturing alone fell 40 percent year on year over the first six months of 2020, a 45-year low.

ING analyst Brzeski said German exports would take time to return to pre-pandemic levels, leaving the country to rely on domestic demand to power its rebound.

KfW chief economist Fritzi Koehler-Geib said the German economy had a "successful start" to the summer but it was "too early to give the all-clear".

"The pre-crisis level will remain a long way off for the foreseeable future, and the continuing fierce rage of the pandemic in large parts of the world is an enormous risk for Germany as an export nation."

(Writer & Editor: Agence France-Presse) 

Source: http://u.afp.com/38s4