Share Prices & Company Research

Market News

24 Feb 2021 | 10:26

German economy fares better than expected in fourth quarter

(Sharecast News) - The German economy fared better than expected in the final months of 2020, official data showed on Wednesday, although growth was sharply lower on the previous quarter. According to Destatis, Germany's Federal Statistical Office, fourth-quarter gross domestic product rose by 0.3% after adjustments for price, seasonal and calendar variations. That was above both analyst expectations and the initial estimate, for 0.1% growth.

Year-on-year, the rate edged up by 0.3 percentage points to -3.7%, a marginal improvement on both consensus and the first estimate for -3.9%.

However, the 0.3% growth seen in the fourth quarter was a notable slowdown on the previous three months.

"After the historic 9.7% slump of the GDP in the second quarter of 2020, the Germany economy had recovered in the third quarter, [at] 8.5%," Destatis noted. "In the fourth quarter, however, the recovery process slowed due to the second coronavirus wave and another lockdown imposed at the end of the year."

There was a 3.3% fall in consumer spending in the last three months of the year, following a jump of 10.8% in the third quarter. Public consumption declined by 0.5%. Construction spending rose by 1.8%, however, and exports by 4.5%.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "Net investment rose by 1%, following a revised 3.9% increase in the third quarter, leaving sizeable gains in inventories and net exports as the main drivers of the small increase in GDP at the end of last year.

"These are encouraging numbers, but they also set up the economy for a stumble in the first quarter.

"Our base case is that GDP will fall by around 1%. Consumers' spending almost surely will remain soft through the first quarter, services will remain held back by virus restrictions, and goods spending will take a hit after the VAT hike."

Carsten Brzeski, global head of macro at ING, said: "The construction sector, industrial activity and foreign demand helped to stop the Germany economy falling into contraction during the second lockdown. The downside to these factors, however, is that it is very unlikely they will again prove to be strong insurance against contraction.

"Instead, the stricter lockdown measures since mid-December, the harsh winter weather in February, a reversal of any pre-Brexit hoarding in the UK and weaker foreign demand at least from other Eurozone countries have increased the risk of an unwelcome rotation. The growth drivers of the fourth quarter could easily become drags in the first."

Destatis also revised its figure for 2020 GDP, to -4.9% from -5.0%. Once adjusted for seasonally effects, the economy - the eurozone's largest - shrank by 5.3% over the year.
Get in touch today
Join Redmayne Bentley
Talk to us now about opening a new account or transferring your account from another provider
0113 243 6941
Get in touch today
Contact your local office
Contact your local office to find out more
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
Continuing our Personal Service: View our Latest COVID-19 Update: 30th April 2021
We use cookies on this site to improve your experience and help us provide you with a better website. An explanation of the cookies we use and their purpose can be found within our Cookie Policy. Your continued use of this site means you consent to the use of cookies.