Germany enters a recession after registering a fall of 9.7%

Even though the drop is less than the expected decrease of 10.1%, Germany’s economy contracted by 2% in the first quarter. This leads to a situation of a technical recession. 

In the second quarter of 2020, Germany’s economy, which is the largest in Europe, suffered a record collapse of 9.7%. This was a result of the impact of the coronavirus pandemic and the containment measures implemented as a result. 

However, the contraction was four-tenths less than the 10.1% drop estimated initially by Destatis, the Federal Statistical Office of Germany.

 

Thus, Germany entered a technical recession in the second quarter of the year, after registering a 2% drop in activity. This is two tenths less than initially estimated, between January and March.

Compared with the second quarter of 2019, the German GDP plunged by 11.3%, exceeding the year-on-year contraction of 7.9% in the second quarter of 2009.

Germany’s trade with other countries plummeted between April and June

Destatis noted that, as a result of the coronavirus pandemic, household consumption dropped dramatically by 10.9% in the second quarter of 2020. Meanwhile, gross fixed capital formation in machinery and equipment decreased by 19.6%. GFCF in construction fell by 4.2%.

According to Destatis, only the final consumption expenditure of the public administrations had a stabilizing effect. They exceeded the figure registered in the previous quarter by 1.5%. They prevented an even more significant decline in GDP.

Moreover, trade with other countries also plummeted between April and June. In the second quarter of 2020, exports of goods and services fell by 20.3% compared to the first quarter of 2020. Imports registered a fall of 16%.

In the first quarter of 2020, German exports had already fallen by 3.3% and imports by 1.9%.

The second-quarter data represent substantially more significant falls in exports and imports than during the financial crisis in the first quarter of 2009.

574,000 people lost their jobs this year

The rate of employment in Germany decreased by 1.3% compared to the previous year. However, the short-time work model made it possible to curb the increase in unemployment.

The number of hours worked by a person dropped extraordinarily low, at 8.8%, compared to 2019. 

Gross wages and the salaries of employees decreased by 4.8% compared to the second quarter of 2019. In net terms, this was a year-on-year decrease of 4.3%. However, due to government aid, household disposable income was only 0.8% lower in Q2 of 2020 than a year earlier.