Germany's Economy Suffers Biggest Quarterly Drop On Record

Caption

A view of the banking district in Frankfurt, Germany, on Thursday. Government statistics show the German economy contracted by 10.1% in the second quarter of this year. / AP

Economic output in Germany — the powerhouse of Europe — shrank during this year's second quarter by 10.1% compared with the same period last year. That double-digit downturn is the steepest since that country's Federal Statistical Office began tracking quarterly economic data a half-century ago.

"It's an astounding figure — minus 10.1%," writes Henrik Böhme, an economic analyst for German state broadcaster DW. "Never before in Germany's postwar history has the country's economy slumped as sharply as in the second quarter of 2020."

The historic slump, which surpasses a 9% contraction forecast by economists polled by Reuters, occurred during a pandemic in which more than 200,000 Germans — a little over 0.2% of the nation's 84 million inhabitants — have been confirmed infected by the coronavirus, according to Johns Hopkins University's pandemic tracking website.

"The [10.1%] figure isn't surprising," Böhme adds, "particularly at a time when the factories stopped producing, container ships stopped loading, services couldn't be provided, trade fairs no longer took place and restaurants had to stay closed."

The decline in Germany's output last quarter, if calculated on an annual basis, would amount to 34.7%. That's a steeper drop than the annualized 32.9% plunge in the U.S. economy during the second quarter of 2020, the sharpest downturn ever recorded for American output. With more than 4.4 million known cases, the U.S. coronavirus infection rate of about 1.3% is more than six times what Germany's is.

Despite the economic contraction, Germany has not suffered a large loss of jobs. Unemployment for June stood at 4.5%, according the Federal Statistical Office, while the number of people employed fell by 1.4% compared with this year's first quarter.

German firms surveyed this month by the Ifo Institute in Munich showed increasing optimism about economic recovery. That was reflected in a rise in the Ifo Business Climate Index from 86.3 points in June to 90.5 points in July.

Still, Germany's prospects remain closely tied to the pandemic's impact elsewhere.

"The extremely export-oriented German economy is likely to suffer all the more," analyst Böhme notes, "as important markets like the United States, as well as countries like Brazil and India, are not really getting the pandemic under control."

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